5.1 – Quick Recap

Reiterating from the previous chapter –

You can classify yourself as an Investor if you hold equity investments for more than 1 year and show income as long term capital gain (LTCG). You can also consider yourself an investor and gains as short term capital gains (STCG) if your holding period is more than 1 day and less than 1 year. We also discussed on how it is best to show your capital gains as a business income if frequency of trades is higher or if investing/trading is your primary source of income.

In this chapter we will discuss on all aspects of taxation when trading is declared as a business income, which can be categorized either as:

Speculative business income – Income from intraday equity trading is considered as speculative. It is considered as speculative as you would be trading without the intention of taking delivery of the contract.

Non-speculative business income – Income from trading F&O (both intraday and overnight) on all the exchanges is considered as non-speculative business income as it has been specifically defined this way. F&O is also considered as non-speculative as these instruments are used for hedging and also for taking/giving delivery of underlying contract. Even though currently almost all equity, currency, & commodity contracts in India are cash settled, but by definition they give rise to giving/taking delivery (there are a few commodity future contracts like gold and almost all agri-commodity contracts with delivery option to it).Income from shorter term equity delivery based trades (held for between 1 day to 1 year) are also best to be considered as non-speculative business income if frequency of such trades executed by you is high or if investing/trading in the markets is your main source of income.

5.2 – Taxation of trading/business income

Unlike capital gains there is no fixed taxation rate when you have a business income. Speculative and non-speculative business income has to be added to all your other income (salary, other business income, bank interest, rental income, and others), and taxes paid according to the tax slab you fall in. You can refer to chapter 1 for tax slabs as applicable for FY 2015-16.

Let me explain this with an example:

My salary – Rs.1,000,000/-

Short term capital gains from deliver based equity – Rs.100,000/-

Profits from F&O trading – Rs.100,000/-

Intraday equity trading – Rs.100,000/-

Gives these incomes for the year, what is my tax liability?

In order to find out my tax liability, I need to calculate my total income by summing up salary, and all business income (speculative and non-speculative). The reason capital gains is not added is because capital gains have fixed taxation rates unlike salary, or business income.

Now, I also have an additional income of Rs.100,000/- classified under short term capital gains from deliver based equity. The tax rate on this is flat 15%.

STCG: Rs 100,000/-, so at 15%, tax liability is Rs.15,000/-

Total tax = Rs.185,000 + Rs.15,000 = Rs.200,000/-

I hope this example gives you a basic orientation of how to treat your income and evaluate your tax liability.

We will now proceed to find a list of important factors that have to be kept in mind when declaring trading as a business income for taxation.

5.3 – Carry forward business loss

If you file your income tax returns on time July 31st for non-audit case and Sept 30th for audit case, you can carry forward any business loss that is incurred.

Speculative losses can be carried forward for 4 years, and can be set-off only against any speculative gains you make in that period.

Non-speculative losses can be set-off against any other business income except salary income the same year. So they can be set-off against bank interest income, rental income, capital gains, but only in the same year.

You carry forward non-speculative losses to the next 8 years; however do remember carried forward non-speculative losses can be set-off only against any non-speculative gains made in that period.

For example consider this – my hotel business income is Rs 1,500,000/-, my interest income for the year is Rs.200,000/-, and I make a non-speculative loss of Rs 700,000. In such case my tax liability for the year would be –

My gain is Rs 1,500,000/ from business and Rs.200,000/- from interest, so total of Rs.1,700,000/-.

I have a non speculative business loss of Rs.700,000/-, which I can use to offset my business gains, and therefore lower my tax liability. Hence

Tax liability = Rs.1,700,000 – 700,000 = Rs.1,000,000/-

So I pay tax on Rs.1,000,000/- as per the tax slab I belong to, which would be –

0 – Rs.250,000 : 0% – Nil

250,000 – Rs.500,000 : 10% – Rs.25,000/-

500,000 – Rs.1,000,000 : 20% – Rs.100,000/-,

Hence, Rs.125,000/- goes out as tax.

5.4 – Offsetting Speculative and non-speculative business income

Speculative (Intraday equity) loss can’t be offset with non-speculative (F&O) gains, but speculative gains can be offset with non-speculative losses.

If you incur speculative (intraday equity) loss of Rs.100,000/- for a year, and non-speculative profit of Rs 100,000/-, then you cannot net-off each other and say zero profits. You would still have to pay taxes on Rs 100,000/- from non-speculative profit, and carry forward the speculative loss.

For example consider this –

Income from Salary = Rs.500,000/-

Non Speculative profit = Rs.100,000/-

Speculative loss = Rs.100,000/-

I calculate my tax liability as –

Total income = Income from Salary + Gains from Non Speculative Business income

= Rs.500,000 + Rs.100,000 = Rs.600,000/-

I’m required to pay the tax on Rs.600,000 as per the slab rates –

0 – Rs.250,000 : 0% – Nil

250,000 – Rs.500,000 : 10% – Rs.25,000/-

500,000 – Rs.600,000 : 20% – Rs.20,000/-,

Hence total tax = Rs.25,000 + Rs.20,000 = Rs.45,000/-

I can carry forward speculative loss of Rs.100,000/-, which I can set-off against any future (upto 4 years) speculative gains. Also to reiterate, speculative business losses can be set-off only against other speculative gains either the same year or when carried forward. Speculative losses can’t be set-off against other business gains.

But if I had speculative gain of Rs 100,000/- and non-speculative loss of Rs 100,000/- they can offset each other, and hence tax in the above example would be only on the salary of Rs 500,000/-.

5.5 What is tax loss harvesting?

Towards the end of a financial year you might have realized profits and unrealized losses. If you let it be, you will end up paying taxes on realized profits, and carrying forward your unrealized losses to next year. This would mean a higher tax outgo immediately, and hence any interest that you could have earned on that capital which goes away as taxes.

You can very easily postpone this tax outgo by booking the unrealized loss, and immediately getting back on the same trade. By booking the loss, the tax liability for the financial year would reduce. We at Zerodha are the only brokerage in India presently giving out a tax loss harvesting report, which will spot all opportunities for you to harvest losses. Click here to learn more.

5.6 – BTST (ATST) – Is it speculative, non-speculative, or STCG?

BTST (Buy today Sell tomorrow) or ATST (Acquire today sell tomorrow) is quite popular among equity traders. It is called BTST when you buy today and sell tomorrow without taking delivery of the stock.

Since you are not taking delivery, should it be considered as speculative similar to intraday equity trading?

There are both schools of thought, one which considers it to be speculative because no delivery was taken. However I come from the second school, which is to consider it as non-speculative/STCG as the exchange itself charges the security transaction tax (STT) for BTST trades similar to regular delivery based trades. A factor to consider is if such BTST trades are done just a few times in the year show it as STCG, but if done frequently it is best to show it as speculative business income.

5.7 – Advance tax – business income

Paying advance tax is important when you have a business income. Like we discussed in the previous chapter, advance tax has to be paid every year – 15% by 15th Jun, 45% by 15th Sep, 75% by 15th Dec, and 100% by 15th March. I guess the question that will arise is % of what?

The % of the annual tax that you are likely to pay, yes! When you have a business income you have to pay most of your taxes before the year ends on March 31st. The issue with trading as a business is that you might have a great year until September, but you can’t extrapolate this to say that you will continue to earn at the same rate until the end of the financial year. It could be more or less.

But everything said and done, you are required to pay that advance tax, otherwise the penalty is 12% annualized for the time period it was not paid for. The best way to pay advance tax is by paying tax for that particular time period, so Sept 15th pay for what was earned until then, and by March 15th close to the year end, you can make all balance payments as you would have a fair idea on how you will close the year. You can claim a tax refund if you end up paying more advance tax than what was required to pay for the financial year. Tax refunds are processed in quick time by IT department.

5.8 – Balance sheet and P&L statements –

When you have trading as a business income, you are required to like any other business create a balance sheet and P&L or income statement for the financial year. Both these financial statements might need an audit based on your turnover and profitability. We will discuss more on this in the next chapter.

5.9 – Turnover and Tax audit

When is audit required?

An audit is required if you have a business income and if your business turnover is more than Rs 1 crore for a financial year. In case of digital transactions (equity transactions are 100% digital), this turnover limit is Rs 2 crores. For equity traders, an audit is also required as per section 44AD in cases where turnover is less than Rs.2 Crores but profits are lesser than 6% of the turnover and total income is above minimum exemption limit.

We will discuss this in detail in the next chapter.

However let us understand what audit really means.

The dictionary meaning of the term “audit” is check, review, inspection, etc. There are various types of audits prescribed under different laws like company law requires a company audit; cost accounting law requires a cost audit, etc. Likewise the Income-tax Law requires the taxpayer to get the audit of the accounts of his business/profession from the view point of Income-tax Law if he meets the above mentioned turnover criteria.

Audit can also be defined as having an accountant verify if you have prepared all your accounts right. In this case it is getting an accountant check if you have created a correct balance sheet and P&L statement for the year. Ideally this audit should be done by the IT department itself, but considering the number of balance sheets out there it is surely impossible for IT department to audit each one of them. Hence we need a Chartered accountant (CA), who is a qualified professional and authorized by Income tax department to perform audits on balance sheet and P&L statements. You the tax payer can use any CA of your choice.

What role should a CA play?

Ideally a CA is required to only audit and sign on the balance sheets and P&L statements. But a CA also typically ends up creating your balance sheets and P&L statements and will audit them only if required. We will in the next chapter briefly explain how a CA typically creates these two statements.

The importance of the audit process by a CA cannot be understated, apart from all the reporting requirements an audit also helps traders/investors know their financial health, ensure it faithfully reflects the income and claims for deduction are correctly made. It also helps lenders evaluate credibility, and act as a check for any fraudulent practices.

Which ITR form to use? – ITR3 (ITR 4 until 2016), we will discuss more on this in the last chapter. I have come across incidents where people have declared both speculative and non-speculative as capital gains to avoid having to declare business income, and not having to use ITR3. Taking a shortcut like this could mean a lot of trouble if called for an IT scrutiny.

Business expenses when trading – Advantage of showing trading as a business is that you can show all expenses incurred as a cost which can then be used to reduce your tax outgo, and if a net loss for the year after all these costs, it can be carried forward as explained above.

Following are some of the expenses that can be shown as a cost when trading

All charges when trading (STT, Brokerage, Exchange charges, and all other taxes). I hope you remember that STT can’t be shown as a cost when declaring income as capital gains, but it can be in case of business income.

Internet/phone bills if used for trading (portion proportionate to your usage on the bill)

Depreciation of computer/other electronics (used for trading)

Rental expense (if the place used for trading, if a room used – portion of your rent)

Salary paid to anyone helping you trade

Advisory fees, cost of books, newspapers, subscriptions and more…

Key takeways from this chapter

Speculative business income if trading intraday equity.

Non-speculative if trading F&O, or short term equity delivery actively.

Speculative losses can’t be set-off against non-speculative gains.

Advance tax has to be paid when trading as a business –15% by Jun 15th 45% by Sep 15th, 75% by Dec 15th and 100% by Mar 15th.

Can claim all expenses if income from trading shown as a business income.

Disclaimer – Do consult a chartered accountant (CA) before filing your returns. The content above is in the context of taxation for retail individual investors/traders only.

983 comments

“An audit is required if you have a business income and if your business turnover is more than Rs.1 Crore for the given financial year. Audit is also required as per section 44AD in cases where turnover is less than Rs.1 Crore but profits are lesser than 8% of the turnover.”

I have two questions –
1) Is an audit required in case I am incurring loss and my turnover is less than 1 cr?
2) How is turnover calculated for advance tax calculation, because the full year is not over by the time we calculate advance tax?

1. If your net income for the year (trading + everything else) is less than 2.5lks, you don’t have to pay any taxes, and hence no audit will be required. But if your net income for the year is above 2.5lks and if you make a trading loss (F&O or intraday equity), yep you need to get an audit.

2. There is no need of calculating turnover for advance tax. Based on whatever profit you have made till the end of sept, dec, and March periods, just pay incremental tax accordingly.

If I have a loss of 20,000 then i need to get it audited for which i will have to pay CA another 10-15,000. So more loss if you make a loss in trading. What a shame, Audit should not be there if there is loss.

If I have a short term loss ( trading in only equity cash market ) which is treated as non-speculative profit/loss and shown under the head ‘business income’ then how to show the shares standing on 31st March -whether as stock in trade or as investments ?

Sir, first of all great article. I have a personal question, please help me out. My salaried income is around 11 lakh, last financial year, I made
1) Intraday EQUITY trading LOSS: 15000/-
2) Delivery based PROFIT (<1 Yr): 38000/-
3) Option trading LOSS: 35000/-

I don't trade daily. In whole yr, I might have placed less than 100 orders in total. I do not wish to get my account audited and also not claim any loss in ITR 4. But do I still have to pay SHORT TERM CAPITAL GAIN TAX, or I can just forget whole share market thing and file ITR 1. Please guide.

I started Stock trading on September month did equity with a loss of 30k and intraday trade with a loss of 40k but then I started F & O trading and I earned 8 lacs in 2 months . When do I have to pay tax and I want to know about taxation charges as well as do I need to audit. Because I don’t have a salary income. I am just a stock trades. One more if earn above 1 crore in a single year what will be the taxation on that.

Trading is a business, so like every business you need to pay an advance tax every quarter on your expected year end income. IF you pay more, you can always get a refund.
Above 1crore, there is a surcharge of 15% on your total tax outgo.

Hi,
Whether tax audit required in foll0wing case:
Total trading turnover – more than 1 crore in FY 15-16, but incurred loss in trading.
Also, total income in same year is less than 2.00 Lakhs .
Is tax audit required?
Also – as a valued added service , can Zerodha provide services of tax consultants to prepare file returns of traders?

Krish, didn’t want to complicate the chapter, here is how interest is calculated for non-payment of advance tax.

In your case since no advance tax has been paid till now, for April 1st to March 31st 2015 point 3 below is applicable (234C) and from April 1st this year till you pay the taxes point 2 (234 B) is applicable .

i) INTEREST U/S 234A: For late or non furnishing of return, simple interest @ 1% for every month or part thereof from the due date of filing of return to the date of furnishing of return, on the tax as determined u/s 143(1) or on regular assessment as reduced by TDS/advance tax paid or tax reliefs, if any, under Double Tax Avoidance Agreements with foreign countries.

(ii) INTEREST U/S 234B: For short fall in payment of advance tax by more than 10%, simple interest @ 1% per month or part thereof is chargeable from 1st April of the assessment year to the date of processing u/s 143(1) or to the date of completion of regular assessment, on the tax as determined u/s 143(1) or on regular assessment less advance tax paid/ TDS or tax reliefs, if any, under Double Tax Avoidance Agreements with foreign countries.

(iii) INTEREST U/S 234C: For deferment of advance tax. If advance tax paid by 15th September is less than 30% of advance tax payable, simple interest @ 1% is payable for three months on tax determined on returned income as reduced by TDS/TCS/Amount of advance tax already paid or tax relief, if any, under Double Tax Avoidance Agreement with forgiving contribution. Similarly, if amount of tax paid on or before 15th December is less than 60% of tax due on returned income, interest @ 1% per month is to be charged for 3 months on the amount stated as above. Again, if the advance tax paid by 15th March is less than tax due on returned income, interest @ 1% per month on the shortfall is to be charged for one month.

(iv) INTEREST U/S 234D: Interest @ 0.5% is levied under this Section when any refund is granted to the assessee u/s 143(1) and on regular assessment it is found that either no refund is due or the amount already refunded exceeds the refund determined on regular assessment. The said interest is levied @ 0.5% on the whole or excess amount so refunded for every month or part thereof from the date of grant of refund to the date of such regular assessment.

Hi Nithin, can a person pay tax on his business income from F&O at the end of two years with penalty although filing IT4 each year? By doing so, people can have a kind of loan at 12% from IT department which otherwise would have gone in income tax.

Vishal, the penalty can be paid, but that will be black mark on your ITR. Also if you don’t file your ITR on time, you can’t carry forward your trading losses or net it off against other business gains.

I have gone through your article about taxation. It’s really wonderful article for beginners like me. It has cleared many concepts.
Also, I checked ‘Q’ and my profit (intra day and short term equity) and turnover for the same. It looks like from the statistics, I need audit as my turnover is less than 1 crore and profit is around 6% of turnover. Can Zerodha provide any support for audit, CA? Further, if I look at the stats, I have got return of around 36% on the invested amount (here I calculate profit as, if I have invested Rs. 100 in stocks, I got Rs 136 now, which according to definition of turnover comes around 26% (36*100/136)). Even if this return/profit(36%) is greater than 8%, according to definition of turnover, it’s merely coming as 6%. In such case, what advise would you give to beginners like me? Or, do we always have to keep in mind the 8% figure before selling the stocks?

I am salaried employee and I have been filling ITR1 form for last 2 years. I could find ITR4S form but not ITR4 form in my online account of IT filing. You have mentioned to use ITR4. WHat should I do in this case?

There are new ITR forms being put up this year, ITR4 is still not out, should be available in the next few days.
You will need to use ITR4 if you have done F&O trading. In ITR 4, if your profit is shown less than 8% of turnover, you will not be able to submit ITR forms as a no audit case. That 8% logic is already pre-coded in ITR4. Audit requirement is based on turnover and not really on how much profit you earned.

You said that “Audit requirement is based on turnover and not really on how much profit you earned.” My turnover is less than Rs. 1 Crore and profit is less than 6% of turnover.(These numbers are from Q tool.) In that case do I need audit? If yes, do you provide any support for audit/CA?

Omkar, currently not providing any CA support from Zerodha. If you are in Bangalore you can contact Taxiq.in.
If no F&O trading and no intraday equity trading, and only equity delivery based or capital gains, then no need of an audit irrespective of turnover. You can use ITR2 in this case.
If you have done intraday equity trading, then you have to show this as speculative business income and you will require ITR 4 and an audit.

from last november 2014, my turnover is more then 3 crores and overall I have incurred a total loss upto 5 lakhs. I did a lot of intraday trades and no longterm investment. do I incur any penalty for non-declarations? what all should I send to the CA? Just the profit and loss statment from start of november until now?

Sambu, since you have incurred a loss there is no advance tax liability and hence no interest/penalty. You can file your returns before Sept 30th, and yes P&L statement would be enough from November till March 31st 2015. If you are trading at Zerodha send the tax P&L statement and also the turnover statement.

hello,
if my salary is 1,80,000 PA
and my short term capital gain for the Period (14-15) is Rs. 242 & for Period (13-14) is Rs. 822 that means i have to pay short term capital gain tax Rs. 159.61 my employer deduct TDS from my salary. should i have to Fill ITR 2 Form.

Sir , How turnover calculated , i m govt employee under trainee presently my annual income is only Rs 1,20000 , i started intraday from jan 2015 onwards on margin basis and presently up to july 2015 i m in net 23000 loss …so i need to pay any tax etc plz reply…..second can govt employee do intraday/trading or not ?? my total buying amount is around 2 crore and selling also around 2 crore..and my net PnL is -23000 i have done only intraday by margin money and invested only 23000 rs…thanx

Turnover is not buying/selling value, check this chapter to understand more.
It is best to find out from your department if you are allowed to trade or not.
If you have made a loss, of course no tax to be paid. Also your annual income is also under minimum tax slab, so there is no tax you have to pay.

Hi Nithin,
I did lot of intraday and short term trading and made net loss of 4,14,000rs…and I don’t have any other source of income…My turnover is more than 1 crore..
1)is audit required in my case??
2)which itr to be used..ITR4 or ITR4S ??
3)can I add my trading expense say about 36000rs and carry forward total loss of Rs 4,50,000 ??
4)if audit is not required,can I fill my return by myself??
Thanks

In my case,as i did short term and intraday…I treat myself as trader.But in current F.Y. I’m not doing active trading,got converted into long term and short term investments…
1)so can I treat myself as investor for the current F.Y. 15-16
2)can I net off my business losses in 14-15 if i get short term and long term profit in 15-16??

Hi Sir, for AY 2017-18 it looks like there is no ITR 4. There is only ITR 3 and ITR 4S available. my income is only from Trading. Turnover is less than 1 crore and am in loss of 1.5 laks and no other income and no tax to be paid. Please advice should i use ITR 3 or ITR 4S. Thanks.

Raj, like we have concurred in this article, audit is not required if your total income (trading + everything else) is less than minimum income tax slab of Rs 2.5lks. If you have no tax liability, there is no need of audit.

In your chapter on squaring off and settling call options, you had mentioned in the comments section that squaring off before the date of expiry is beneficial from a taxation point of view as opposed to waiting till the expiry of the call option. What is the tax benefit? Thanks a lot for Zerodha varsity. Without Zerodha varsity, I would not have entered the stock market in the first place.

I guess what Karthik was referring to by taxation is STT (security transaction tax). STT on squared off option is 0.017% on sell side of only the premium value. STT on expired in the money options is 0.125% of the entire contract value, which can be quite high. Check this blogpost, explains about the same.

Thank you Nithin! This information is vital to options buying! Maybe Karthik can include this in the main body of his articles in the call buying and put buying chapters, as this is so important. Thanks a lot to both of you, as usual.

Hi I had bought IndusInd Bank shares in IPO few years back, they were in physical form. In December 2014 I got them converted into Demat form and sold of few of them. The Gains relaized are Long Term Gains, but if we look from my Demat account it shows Short term gain, has the Shares were not present in my Demat account before Dec 2014 and were sold off within few days after they were Dematrialized. Do advise whether they would be LTCG / STCG ?

Hi I had physical shares in my late Fathers name, they were with him for few Years. After his demise I have got them Dematrialized into my Demat Account. Now if I Sell them, would I have to show them has LTCG / STCG ? They were part of Inheritance from my Dad, how would I show them in my Tax returns ? Please do advise.

Hi…
I trade only F&O and trading income is my sole source of income while I have an office for a trading purpose with 3 employees resulting in an annual expense of Rs.900,000 ( which includes rent, power, internet, salary ect)

If My 10lk trading account become 25lks at the end of financial year then how much tax I will be Paying??

If you make 15lks profit, Rs 9lks is your cost. Then you would have made Rs 6lks net profit. Upto Rs 2.5lks no tax, 2.5 to 5lks 10 % so 25k, 5lks to 6lks 20% so 20k. You will have to pay Rs 45000 in taxes.

Hi, For the financial Year 2013-14 I have incurred a loss of 5,75,000 in Non Speculative Income. Also I do have Salary Income & Rental Income. Whether I can declare my Loss in this Ass. Year 2015-16 and set off against the forthcoming Ass. Years. Also pls. let me know whether I am subjected to Audit

Losses can be carried forward only if filed on time. So you can revise your 13/14 returns, but you cannot get the benefit of carrying forward your losses. You will need the books to be audited if your total income/profit for the year is over 2.5lks (from all sources), but non-spec business income is less than 8% of turnover. Do check out the chapter on Turnover.

Hello, I have Recived Noties — Non Filling of Income Tax return ..
FINANCIAL YEAR 2012-13—- Contract of Rs. 10,00,000/- or more in the Commodities Exchange in CIB-502. He never filed return of income. Now what ????

Unfortunately the returns for Year 2012/13 can’t be filed now. You would have to just meet the income tax officer, and take it forward from there. There definitely would be a penalty component on any tax not declared/filed.

Sir, when we are declaring profits of mutual funds or equity delivery as business income; we still have to mention about that under capital gains head in itr4 right ?
(Zerodha Mumbai office don’t reply to emails ? had enquired abt account opening)
Thanks.

If you are showing them as business income, it shouldn’t be shown as capital gains. It should be treated as business income itself. Checking with the Mumbai team. Best way would be to leave your number here: https://zerodha.com/open-account

I have some speculation business gain during last year. I will use ITR 4 . Please tell me about following info in ITR……..
1. what should be my nature of business?
2. Where exactly shall I show my speculation gains ? … I could not find place in P&l sheet
3. I have pension income – do I need to give employer name , address etc.?
4. in sch S – where exactly I should put my pension amount? at gross salary row or somewhere else?

Please advice at early date so that return can be filed in time
Thanks in advance

Nilesh, don’t want to get into calculating exact tax liability, best to speak to a CA. Looks like you have around 7lks of business income, 75k of speculative loss, so around 6.25 lks. LTCG is exempt from taxes. Tax around 10% or 25k for 2.5 to 5lk, 20% or 25k between 5lks to 6.25lk. So around 50k. But since you have invested in PPF, it will be lower than this.

Thanks for putting up this page. As per the instructions above, I have to get my F&O and Short term trading statements audited. What documents do I need to get my trading audited and where can I download them from the backoffice? I have seen the facility of Tax PnL in the Q Backoffice, but I’m not able to download them. Please help.

Hi, I have done delivery based trading in FY 2014-15 in which I have about Rs.2,00,000/- loss. My frequency and no. of shares bought is pretty high. Hi I also done speculative intraday trading in which my loss is Rs. 4,78,000/-. My income for salary is Rs. 9,00,000/-. Now I went to a CA and he is telling me that audit is not applicable to me as delivery based trading done by me is investment. My turnover in delivery based trading is 95 lacs and for intraday trading is 9 lacs. What should I do?

Ankit, Intraday trading is treated as speculative business income. So if you are being 100% compliant, since intraday income (loss of 4.78lks) is less than 8% of business turnover, and you fall in the tax bracket, audit will be required.

Is there a limit on rental expense? Sec 80gg says max Rs. 2000 pm can be deducted. I stay in a rented appartment with family, but one room which owner has given me separately for 4500 pm. Agreement and receipts are there. So can 4500 pm be shown as expense. I am self employed. So no hra. Please advice

Hi, I am full time trader in F&O segment, doing Intraday/Short term started from 1 July 2015..My turnover is more than 1 CR and profit is around 1%..Should i file tax this year or next year? Do i need to pay advance tax? Does this income under business income since i don’t have anyother income?

Hi Nithin ,
I have done few trades and my total turnover fro FY 14-15 may be more then 1 Cr but my income from the same is less then 2.5 Lacks.In that case may i need to file normal ITR or Audited ITR ?

I have recently completed my MBA, prior to which I had worked and filed my returns. During the past year I had no income. I did some trading and have losses of around 50000. Do I still have to file returns if I had taken a year of education break? Can I show these losses for next assessment year if I do not file returns this year?

Arijit, you are not forced to file ITR, but I think it is best to do. There are many who have received notices this year for not filing ITR in 2012/13 even if they hadn’t made profits. In such a case, you will have to unnecessarily take the effort of explaining the ITO.

I am filing ITR 4 for the first time and have some confusions. Really appreciate if you can help me with this. I have below income.
Salary income
Intraday loss of 1.1L
expenses for doing trading 26K
(Expenses are for laptop cost/depreciation, electricity, internet connection).

1) Salary –
I have entered salary info in “Schedule S” along with TDS details in TDS sheet. Is that a right place?

2)Intraday loss
I have entered in “Schedule BP” (Item 39). Is that a right place?

3)Other expenses
I have entered in “Schedule BP” (Item 39), I summed this amount with intraday loss and entered as 1.36L. Is that a right place to add?
Also, is there a place where I can show split up of other expenses?

Hi Nithin,
I got a notice from IT that my return related to intraday loss carry forward is incorrect. Please check the attachment for exact note from IT department.
Below is what I updated in the ITR-4 xls file:
Profit and Loss sheet: In Section 53c, entered expense total as 1.1L (not filled any other cells in that sheet)
Scheduled BO sheet:
In section A.1.2a, entered expense total as -1.1L
In section B.39, entered other expense as 26K

Highly appreciate if you can give some suggestion to correct this error.

hi nitin,
right now iam not working from 20 march 2015 but i am done some intrady &delivery trading in cash segement from 25 april 2015.either iam not salaried person and also self employed/business. can i file income tax return for 2015-2016 & what be the head. when i filed income tax return( what be the percentage)

Mayur all income generated from April 1st 2015 has to be filed only by next year July. Currently you have to file only for the time period between April 1st 2014 to March 31st 2015. Intraday trading is speculative business, delivery is capital gains, u will need to use ITR4. Do read through all the chapters of this module.

Now my CA has realised that audit is required. But he is still saying that my loss of Rs. 2,00,000/- in delivery based trading would be taken as investment loss and not business loss. What should I do?

Ankit check the first chapter on classifying yourself, if you consider delivery based trading as a business u can add it to business loss. If you consider them as investments, it will be treated as capital loss/investment loss. This classification has to be done by you/your CA. The thing to remember is to continue same classification next year as well, there has to be consistency in how you classify yourself.

I have delivery based trading with high frequency and consider it to be business loss. But CA is simply classifying delivery based as investment. My question is it going to create any problems?
Also I left my job last year. So in this year my income will be only due to trading i.e business income.

Ankit, best to reason this out and go with what ur CA says. If it is really high frequency, it is better to show as a business income instead of capital gains. But since there is no definition from the IT department on what is higher frequency, so it should be alright.

I am a Insurance advisor(self employed) and having commission income(4,67,000) and I am a regular F&O trader in zerodha, Now for FY 2014-15 I have incurred loss of 1.5 Lakhs and my total turnover as per p&l statement is 14 lakhs. I want to know which ITR form should I use, Does tax audit required? and I want to carry forward the loss. As I am planning to declare the loss for the first time. I tried contacting many CAs and other friends. But unable to get the complete clarity. As tomorrow is last date for filing and in case of loss carry forward. Kindly provide me suitable solution ASAP.

I have no other income other than trading income I do both F&O trades and delivery based trades in cash segment. I understand I have to prepare a p&l a/c and balance sheet. i want to know how to calculate net sales and purchase value for feeding in the ITR4. I have done only option trading. Does STT and brokerage and other charges which are charged on a transaction have to reduced from the transaction value to arrive at sale and purchase price. I have incurred a loss of around 3 lac Rs and have no other income except rental and interest income from FDR’s and is less than the taxable income of 2.5 lacs. please reply ASAP as today is the last date.

Lalit, the total gross profits can be shown as Receipts and Losses as Sales on ITR4. Gross profits + losses = gross loss of Rs 3lks for the year. All STT, Brokerage etc can be shown as expenses. So your net profit/loss ITR4 will automatically calculate. Maybe it will be good for u to meet a CA and take his help to fill the ITR4 form.

For FY 2015-15, I have a salary of 260,000 and Loss of 360,000 in FNO with turnover Rs. 39,28,000. Do I need to file audited return? I have spoke with many CAs and everybody is giving diferent explanation.

It’d be great, if you name any good CA in Bangalore who has deep understanding of stock market.

Check out http://www.taxiq.in, they are from Blore. In your case it is quite tricky, if you have no income tax to be paid for last year, then no audit is required. Income tax slabs come into play for salary above 2.5lks, u r just over it. Do speak to the taxiq team, or consult any other CA.

How about commodities do they come under speculative or non speculative trades.
While going through MCX profit & loss account i have net values i.e profit values & loss values.Adding profit values and loss values do i get my turn over.

Digital signature will cost you between Rs 1000 to Rs 2000. Choosing a CA is like choosing an architect/lawyer/doctor, nothing is high or low. It is a little higher than average, but if he is doing a good job, it isn’t.

i got toal amount of rs. 30 lacs for the financial year 2014-2015 as a professional fees.they have given me form 16 a and they deducted toal amount of rs 300000, during 2014-2015 i book a loss of rs. 1450000. now how much tax i have to pay more. sanjeev mohanty

SIR SUPPOSE I HAVE INVESTED IN STOCKS OF RS.12 LACS IN FINANCIAL YEAR 2015-2016, AND I HAVE DECEIDED TO SELL MY HOLDING IN 2020, THEN I HAVE TO SHOW THESE ON ITR OR NOT,AND THE FORM I MUST HAVE TO USE AT THIS SITUATION

Dear Nithin
Damn confused by my tax audit requirements . Pls clarify whether i need an audit or not .
1. I have a salary income of 2,40,000.
2. Int income of around 5000
3. F&O loss of around 6,00,000. ( Turnover over 1 cr. )
Pls help me out .
thnx.

thnx for ur reply nithin. Just 1 more query . Can u help me out with the ITR form no i am supposed to file my return in this case ? my accountant told me to file in ITR3 and book losses from F&O trading . But i cant find any option in ITR3 to state my losses . Do i need to file in ITR-4 ?

Assume a situation where in there is profit from F&O and Turnover is more than 1 Crore and but actual profit received by trader is less than 8% of Turnover. Suppose audit is also done then and found that actual profit is less than 8% of Turnover then how much tax to be paid in such case.

Say for example Turnover is 2 Crore and as per that 8% of Turnover which is 16 Lakh is considered as profit by IT Dept and on that at the rate of 30.09% the Tax works out to be 4,81,440. Now assume that Trader has actually received only 4 Lakh as Actual Profit in his hands after deducting say other expenses like Trading fees etc. Now if Trader goes thru Audit thru CA and Auditor also says same 4 Lakh as the actual profit then whether trader now can pay tax on 4 Lakh at the rate of 30.09% which works to be 1,20,360 or still have pay minimum tax of 4,81,440 calculated on the basis of Turnover. Basically want to know whether tax paid will be minimum of Tax on Actual profit and tax amt as per IT rule of tax on 8% of Turnover. Please clarify on this. Audit is fine but will that help here in this case to pay on tax on Actual profit with the audit. Because in this case say if we IT way calculation Tax would be more than actual profit received in the hand of Trader.

Another scenario is if the Profit is more than IT dept calculation of 8% of Turnover then with audit whether tax to be paid on Actual profit or on 8% of Turnover in this case. What should be way in the case max of these two or max of 8% of turnover please clarify. In this case consider Actual Profit of say 30 Lakhs so whether tax will be on 30 Lakhs or on 16 Lakhs (8% of Turn over of 2 Crore). Please clarify

Also mention whether CA fees can also be shown as deduction for the Profit Calculation

hmm.. I am not able to get what you are trying to ask. Can you go through all the chapters, we have one chapter on turnover and audit. Turnover calculation is only to determine if you need an audit or not. How much tax you have to pay is based on the income tax slab you fall in. Yes CA fees can be shown as deduction.

Also clarify when audit is done who has to file the return for the trader ? whether CA need to file Income tax return along with Audit report upload or CA will only upload Audit report and Trader has to file the return after CA uploads the Audit report. Please clarify.

I have another query whether advance tax payment is applicable for F&O profits received and is it due every Qtr during the financial year. What happens if there is profit in first 3 qtrs and loss in Qtr 4 and overall there is loss in the FY year at the end of the FY year. If advance tax is paid for first 3 qtrs say and in the 4th Qtr loss is more than profit of Previous 3 Qtrs whether IT Dept will refund the advances paid as there is loss or will adjust it for next financial year . how does Advance tax payment in case of F&O Profits. If advance Tax has to be paid then what form to be used for payment .

Your CA will file your returns along with audit. Yes advance tax is applicable on F&O profits received. If you end up paying tax and there is a loss, you can get a tax refund. Check section 5.7 in the above chapter, you can see the link to the form to pay advance tax.

No Sir, I have both gains from both long term (more than 365 days) and also short term delivery based (more than 1 day but less than 365 days). my turnover for long and short term put together might be 2 cr. So I think I would be classified trader. So which I have to pay tax on long term capital gains also? Moreover I am a salaried person.

Hi Nitin thanks, could you please suggest me a good CA who can take care of my accounting and audit needs (if required). I want to do trading/investing on large scale but hesitate due to these taxation issues. my emails id is [email protected]

I have a loss of 5 lakhs in derivatives and I am getting audit done. But I also happen to be a working professional and been filing only ITR 1 and 2 till this time. This time I am filing ITR 4. Questions – a)Any consequence of filing ITR 4 viz a viz with my employment as they would not know about my trading. b) For consequent years also should I continue to file ITR 4 even if I have discontinued doing trading?
Thanks for this much needed information in your website else it is difficult since most of the CA’s also seem to be unaware of sections, turnover calculations and stuff.

I am an agriculturist. my only taxable income is stock market. total income in stocks (including equity intra day,short term investment, long term investment) is nearly 20,000 per year. does I have to pay tax since my total income did not cross even 1 lac

Until october, your FD income will probably be around 1lk, you have 9.3lks in profit, 1.3 in losses carried forward. So total around 9lks net income for the year until now. How much you want to pay as advance tax will depend on you, since this is business of trading the year could end up either above this 9lks or below. So I think it is best to be conservative, and pay a small amount as tax. Probably around Rs 50,000. Best to consult a CA for all of this.

Sir,thanks for the previous answer,
sir i want to know are there any kind of restrictions regarding selling of shares bought under IPO in India ,like can you sell them within one year ? And if there are any kind of restrictions or rules which brokerage houses use to prevent trading of IPO shares or from companies in India?
like i come to know that some brokerage houses don’t let you invest in IPO again for some time if you buy and sell IPO shares soon after they are listed .

I have received a notice from IT department for not filing the returns for the assessment year 2014-2015.
In the more information tab, it is mentioned STT-03 ( sale of equity shares settled without actual delivery – for the financial year 2013-2014 )
during financial year 2013 – 2014, i was salaried ( 3.7 lakhs per annum ) and the TDS has been paid for this. I have made only 2 intraday trades in equities during this period with a loss of 64 Rs. Total purchase and sell value is less than 2000 Rs.( it was just experimental)
Is there any way to avoid auditing for these 2 trades.
If i not disclose this loss, will i be scruitinized ? what would be your advise, please help
Regards
Sreejith

Thanks Nitin.
Is it possible to show 8% of the total turn over in ITR – 4 if we have done trades in intraday equity and F&O and suffered a loss, to avoid the audit.
Also i would like to know what will be a book of account with regard to trading. What should be the entries in it ? Will the zerodha statement suffice , or we need to maintain a separate one
Regards
Sreejith

IT department will have a problem if you declare less tax (avoid tax), no one has a problem if you pay tax :). So yeah, you can declare 8% of turnover as profit and pay tax on it and get away from need of an audit. With regards to trading, yeah the P&L statement should suffice.

Nithin Sir,
Thanks for your advice. my situation is similar to Sreejith’s (above). but how can we show profit as 8% if we incurred loss from intrday? i mean if we have to provide tax P&L report, then that report shows the loss right? or can we edit the tax p&L report? iin my tax p&L report intraday turnover showing as ~1300/- and gross profit ~20/- and total charges ~300/-. please clarify. thank you.

Thanks a lot for the detailed explanation. I would definitely follow this site.
As u said FNO loss can be C/f and cab aset off with future business income. Can u clarify if past year’s( carried forward) FNO loss can be set off in the flowing 8 years with other income like interest on fixed deposit etc?

The same year it can be setoff against any other business income. But when you carry forward the loss, based on what head (on balance sheet) you carry forward, it can be setoff against profits on the same head in the future years.

Thanks a lot for the reply:),I am sorry, but just to clarify, say I had filled previous year FNO loss as business loss, So i understand that u can surely set off future business profit, but the question is can be set off “OTHER INCOME LIKE fd INTERESTS”. Thanks

Hi
I have started a commission based business and my turn over is 2 to 3 cr monthly but my profits are 30000 per month so how should I show my business returns and turnover in income tax .I even wanted to know this business comes under which business
Reply ASAP

hello sir
as i am salaried person planning to invest in elss mutual fund to save on tax
so my question is
if i invest Rs 30000/- before march, can i get tax benefit up to 03 years as lock in period for the same is 03 yrs i mean can show duduction under sec 80 for

If you invest Rs 30000 this year, you can get benefit of upto this much as deduction before calculating tax. So if your income is Rs 5.3 lks per year, by investing 30k, your taxable income becomes Rs 5lks. So by investing 30,000 you save Rs 6000 which you would have otherwise paid as taxes. This is locked in for 3 years, if you sell before that you loose the benefit that the ELSS gave you.

1) what about money earned on corporate bonds , govt. securities in the form of coupon rate ?

2) money earned via discount bonds ?

3) most importantly money made by short term RBI treasury bills, treasury notes etc ?

4) i buy a long-term govt. bond at rs.1000 face value earn first coupon rate of 7% after 6 months , then sell it off in market at lets say at rs.1050 appreciated value after 9 months . what happens in this case ?

If my annual income is 12 lakh per annum and I earn rs 10/12 laskh in F&O and declare it under non speculative buisness income. so I will have
to pay 15 % tax on F&O profit or tax as per my tax bracket (i.e 30%) ??

Hi Nithin Sir,
I do intraday trade (scalping) in Option Premiums…so for it is the only source of earning for me. Is there any procedure to declare it as a business activity or filing ITR 4 is sufficient?? I mean I come to know that Bombay Shop Act is required if you have to run business in Maharashtra. I am also running business but from my home itself and not from any other business place..Do I require to have Bombay Shop Act License to declare my trading activity as a business?
Kindly explain..

Thanks for making me relieved……!!!! One more question Sir…In the evening I always get a message from Zerodha that your total traded value is 4 lakh or 5 lakh…this means soon I am going to cross 1 cr turnover limit….but I am in a loss so far…
so Do I require to conduct audit if my turnover is above 1 cr and I am in a loss…..??

Sir, I have been trading in Commodities market from last 3 years but unfortunately never filed ITR and now I have received Income tax notice for non filing of ITR I have been constantly having losses in Intraday trading, information is as per CIB 502

It is best to meet a CA to respond to this notice. Since you have made losses, you could send an explanation. The only issue could be if you haven’t gotten your books audited (which is a requirement) if your turnover is above Rs 1 crore or in case if it is lesser than 1cr if profit less than 8% of turnover, and if you have other tax liability. Do read through the entire module, you should get an idea.

i am a salaried employee working in private sector . my annual income is 3 laks. i am filing IT return every year by my employer given form 16. i am also doing intraday & delivery based equity trading from last 1 year . my turnover is less than 1 crore and a loss of 3000/- in this duration. now help me know whether i have declare anything to the IT dept if yes than how?

Sir I got a notice from incometax department for not filling of tax I am a trader I have don intrady dilivery and comodity trading and having lose in all so what to do
G I had not filled any itr I am a saleried person

Since you had a loss, that means you didn’t really evade paying any taxes, so you are okay. You will have to go meet the ITO and explain him this. When you meet him, take a copy of your trading ledger, P&L statement, to show the loss that you have incurred. Since exchanges share turnover data with IT department, it is best to always declare.

Dear Sir,
I have loss of 13k in 13-14fy,profit of 57k in 14-15Fy and loss 1.5lacs in 15-16fy and i have no other source of income and not filled ITR.would i file a return?if yes is my book audited?
Thanx in advance

My client id is DS7641 zerodha..my query is about itr.i am student.my annual income is below 2.50lakh..i have no other source income..in 2015-16 fy ..my short term trade total turnover is 1,83,524(7000 realized profit)and intraday/speculation trade total turnover is 763.55 as well as realized profit..so do i need itr form or other form???

Dear Sir,
thank you for your amazing articles on trading and taxation, it is a blessing for us.
Sir my query is
I have bought 1 lot of april CE option of nifty in march 2016, if I sell this in april 2016, then
its profit/loss must be included in financial year 2015-2016 OR 2016-2017 ?
its turnover must be included in financial year 2015-2016 OR 2016-2017 ?
the buying amount of the option contract must be added in ledger or not ? if yes, then in financial year 2015-2016 OR 2016-2017 ?
Awaiting your reply.
Thank you.

The best way to do is to MTM all open positions to 31st March, yeah even open option positions. So whatever is the closing price on 31th use that to calculate the profit/loss for 2015/16 and use that price as the starting point for the option position for FY 16/17.

The following two statements appear to contradict each other (apparently).

“Non-speculative losses can be set-off against any other business income except salary income the same year. So they can be set-off against bank interest income, rental income, capital gains, but only in the same year.

You carry forward non-speculative losses to the next 8 years; however do remember carried forward non-speculative losses can be set-off only against any non-speculative gains made in that period.”

The first sentence says, “Same year”. The second statement appears to allow carry-forward. Which means it can be set-off against “same year” as well as “future business gains and capital gains”.

Assuming after offsetting your losses against all other gains this year, you have some losses still pending to be offset. This can be carried forward for the next 8 years, but when you carry forward to the next year or more, it has to be offset against non-speculative gains only.

I have an delivery volume of Rs 1.25 coror and fno rs 50 lakh and intraday nse/bse Rs.50 lakhs I have an beautyparlour
income of Rs 1 lakh in this year I have made and loss in equity deliver 70K, intraday loss nse/bse .5K, fno loss .35 K
net loss of .7+.5+.35=1.55 – 1 beauty parlour income so net profit is .55K so can I go for audit my turnover of delivery will
excedded 1 cr and can I fill itr4s in which date I mean last date. thnaks

You will not be able to file using ITR4S because of those intraday equity trading (speculative, which can’t be shown on ITR4S). So you will need to use ITR4 itself, and yeah best to get an audit done. Like I said, audit is quite a simple task. End of september is usually the last day for people with audit.

If you are showing delivery trades as capital gains, there is no concept of turnover to be calculated. You need to declare turnover only if you declare your delivery trades as a non-speculative business income. In case of delivery, the selling value of all your stocks add upto turnover.

Mr. Nitin Kamath,
I can’t you thank you enough for your wonderful service and I highly praise your dedication and professional approach to your work giving it the highest priority with utmost sincerity. I just hope there are more entrepreneurs like you who possess such great qualities and values which our country urgently needs. Once again thank you for the prompt reply.

I have filled my eretun of F.Y.2015/16 last year , I have an income of rs.230000 per year, I have filled itr4s in that year,i have scnuti in F.Y. 2014/15 this is running now I have to change my 2015/16 fy return becauz I have not giving information regarding
the my stock market business I have go for audit also becz my turnover was mark 1 cr in delivery I have a net loss of 8 lakhs in that year can F.y. 2015/16 return can modify with audit or not what can the easy way pl suggest.

Sir, i am an government employee having salary 4.2 lac pa and made a intraday trading loss of amount 2 lac in FY 2015-16 with a turn over more than 20 Crore. how i file it in return and can i carry forward this loss in FY 2016-17

HI, I have no other income and i am doing intraday trading since May 1st 2016..I would expect that my turnover will cross more than 1 crore but the profit will be less than 1.5 lakhs…
1. I believe, i need not to pay tax as per tax slab
2. No need of audit since it the profit is less than 8%
3. do i need to file ITR
4. If i need to file ITR, what is the form no.

Hi,
I have EquityCash-Delivery (Non-speculative) turnover 19 lacs ( sell side ) capital gain of Rs. 62,200
I have no salary income.
Intraday turnover 1.2 Lacs and profit of Rs. 1500.
No F&O Trading done.
My total income coming less than 2.5 Lacs.
Which ITR form should I fill sir. ITR 2 or ITR 4.
Request you to advice.

is taxation there for professional traders? if my profit goes upto 50 lakh per year?
i am curious to know , i am trading with zerodha since few months, but as i am paying sebi charges and all mentioned in my balance sheet, i would still like to know the details of taxation for freelance trader.

Hi Nitin,
Many thanks for such a wonderful content. The case studies are clear. Please add a scenario of having no other income other than trading and total income is less than 2.5 lakhs.
I came with that doubt and clarified by the comments. It is better, if it is part of varsity 🙂
Keep rocking.

Dear Nitin Sir ,
If My Delivery Based trading Turnover is under 10 lacks and non-Delivery Based ( intra-day ) trading Turnover is over 1 crore , sir Should I need ‘ Tax Audit ‘ from CA ?? or just show Speculative Business Income is enough ?

Hi NItin,
I have turnover in FNo below 1 crore and profits less than 8% .
My total income is above 2,50,000 but net taxable income is below 2,50,000/- after dedcutions.
eg
RENTAL INCOME Rs.400000/- deduction 30% so taxable = Rs.280000/-
Long Term Capital gains Rs. 100000/- not taxable.
Short term capital Gains Rs.50,000/-
FNO trading Loss Rs-50000/-
80c benefits Rs 100000/-

hi, I am doing trading in stck market I have no other business or service my delivery btst volume will 1.10 cr. can I represent it to an non speculative business and I don’t want to go for ca for audit my loss was 80k, I want to file simple itr4s if don’t file return what happen or not audited how it dept can find that my turn over will above 1 cr what will the future implications.

If you are transacting in the markets, it is best to file returns. It will be super simple for IT departments to spot this, since exchange share trade details with IT department. Yeah, you could show this as non-speculative business losses (grey area, since this could also be considered as speculative since you are not taking delivery. But if your broker like Zerodha takes delivery of shares in ur demat and then sells it, it can be considered non-speculative). Yeah, you could use ITR4S, but since you have no other income and just losses, there is no audit required, so best to use ITR4. You can even carry forward this loss.

Hi, I have an business of beauty parlour I have filled simple 4s return during 2013/14 f.y. last week my return was under
scrunity and I have a notice from it dept in which under142(1) they said you have purchased the property during
this year and why not disclosed in the return. what was the complications of this can u gide me my income was 210000
and the property deem was rs 550000 thanks

HI Nithin, I have salary income of Rs. 200000 and Professional income of Rs. 20000, I incurred loss in speculative business of Rs 40000 and non Speculative Rs 1,00,000. I have life insurance of Rs. 50000 and NPS Rs. 10,000. If I show loss, will I require to be audited.

Sir, I am pensioner having pension income Rs.2,60,000/- Bank Interest Rs.2,45,000/- (Total Rs.5,05,000/-) during last financial year 2015-16 there is loss of Rs.1,17,090/- from FNO Trading and small amount of profit Rs.3800/- from short term/intra day trading (net loss of Rs.1,14,090/- ). The total turnover (both FNO & intraday) is less than Rs.1 Crore ( Rs.11,65,081/-). 8% of total turnover comes to Rs.93,206/- so my total loss (Rs.1,14,090/-) is more then 8% of total turnover . Under Section 44AB of IT Rules written as if turn over is less than Rs.1 cr and profibility is less than 8% of turn over Audit is required. Kindly advice whether (i) Audit is required in this case (ii) ITR-4 can be filled. (iii) Full amount of loss can be deducted from Bank Interest income. Thanks & Regards, Sekhri

Dear Nitin,
The entire Varsity concept and execution is extremely helpful. While I’ve not gone through all the modules, the ones that are of interest to me seem to be well laid out and provide a superb base for learning. And of course, the Q&As here answer 99% of the questions that come to one’s mind.
Brilliant initiative – thanks for this. God bless you and your team!
Regards,
Vinayak Parameswaran.

thanks a ton. She did get a notice for 2012-2013. but no clause (act) is written. she was asked to furnish her response in the COMPLIANCE MODULE. Which we did. do we have to meet anybody in the income tax dept also.
Please reply.

Thanks for very fast reply.Tax slab rate for 2.5l to 5l it’s 15% ,for 5l to to10l it’s 20 % and 10l above its 30% as given in before chapters.But ,I’m required to pay the tax on Rs.600,000 as per the slab rates –

Sir, You are doing a great job. Really appreciate it.
I had given money to my wife. And she has used most of it in share trading and incurred loss.
1 . Can show it as loan and file loss in her return or better to show as income from other source and file return accordingly

Sir, i am filing ITR 4 as I am an active trader.
I annual income from salary is 12 lacs.
Long term capital gain 68k
Loss from F&o 52k
Do i have to pay tax on long term captain gain also.
Can’t i dedeuct loss of f&o from it
Thanks

Along with the trading loss, you can add all expenses that you incurred while trading, and carry forward it to next 8 years. This loss can be set off against gains in the future. Since you have a business loss, no taxes on this. You will have to pay taxes on your salary income though. Do go through the entire module.

In last financial year(2015-16), my total turnover is 1.6 crore in equity speculative transaction and got profit Rs.20000 andgot loss Rs.55,000. If any audit required in my case or not? I don’t have other income source. Which file I use for income tax return. I really confused.

Sir,
My wife salary was just 1.2 lacs per year and we do F&O also. in which we have loss. Never filed her ITR.

Now CA has filed my return for 2014-15 (ITR1) and 2016-17(ITR2). and also shown some extra income and filed ITR of gross income as 2.69Lacs for both the yeas. But didn’t give any tax. he says there is addition benefit of 2000 INR for income less than 5/Lac.

What should I do now as now I have to maintain books, he has shown income of more than 2.5 lacs. He is not listening. Should I file my return again in ITR4. or just leave it?

Ideally you should have filed using ITR4 itself. But you are not evading any taxes, so you should be okay. For AY 16/17, if you can rectify your returns, I’d suggest it is best to do so. Also if it is only F&O, you can use ITR4S, no need of audit and all. Check out the chapter on ITR forms.

Check out about ITR4S in this post. ITR4S has been introduced by govt to make life easier for very small businesses, so if your turnover is under Rs 2crores from this year and if your profit is >8% of your turnover, you don’t need an audit. Suggest you to go through the entire module once.

How to calculate profit and turnover in the following cases.
Sold LIC 30 APRIl 420Put @6.45 (lOt size 1000) on March 15–Different FY
and square of on 15th April 15 @1. Profit of 5.45. but sold in different FY.

Now the questions are …
1. Should I use ITR 4 Or ITR 4S is also acceptable ?
2. Will the three days back released govt. relief for “Section 44AD – Income from Business” by paying tax on 8% assumed profit on turnover can be used by me?. (If this is acceptable I can save a lot really). Would you please give a detailed answer to this please….

1. Technically you could use ITR4S and save quite a bit of taxes. But this is a grey area, a loophole of sorts. Best to consult a CA.
2. THis is not three days back, this option has always been there. Check this chapter, I have explained about ITR4S.

I am a trader. i will buy and sell shares intraday. I am also a zerodha customer. I shifted from other account. Last year i loss 3 laks. How to file the returns. I am salaried employee. is any auditor required. Please suggest me. daily 25 laks turnover will do with shares intraday.
Please advise me how to file incometax.

Sir, Last year I have filled ITR1 (Saral) that time I had only salary income. Now I am trading in F&O from Jan-2016
My annual income from salary is 3.8 lacs.
Received PF amount of Previous/Earlier Employer 1.3 lac
Loss from F&O 100k

1) Which ITR form I have to File this Year?
2) Can I adjust my losses or Carry forward
3) Can I Adjust My this Losses with Next Year F&O Profit

1. ITR4
2. You can adjust F&O losses only toward other business income/trading gains. You don’t have any, so you can carry forward this to next 8 years and adjust in the future.
3. yep, make sure to file returns on time.

If my broker is already collecting TDS on STCG (15+Cess%) and non-speculative business income (F&O) (30.9%) at the upper limit for FY17 then still I need to pay advance tax – as its already taken care of the upper limit tax of my income for the year every time I get a profit?

My PIS accounts are with Axis Bank, I am not sure if its collected by the Bank itself. In case if they pay the advance tax, should I be getting a TDS certificate of the same, well before the due date for advance tax?

If i have a loss in intraday trading then,
1) is it necessary to audit it?
2) my total income is under tax limit then it is necessary to file ITR losses (because loss is very small i.e. Rs. 143), and hence i dont want to pay fees for audit it.

Sir I am an Private employee and my salary is more than 6Lacs, I have made a profit in FY 15-16 of around 900Rs. I have made a loss from Intraday and Short term trading in FY 16-17 around 11000 so Which ITR should I use for FY 15-16 and FY 16-17. Please guide.

vallabh
sir,
I am a pensioner having net income of rs 2.80lk after 80c and 80d deductions. iam trading in f&o and also intraday. my turnover
is rs4.88lk and LOSS of rs 85000/ . for sr. citizens upto rs 3.00lk is nil. in my case does tax audit is required after taking into consideration my net income and the loss incurred in f&o and intraday. kindly guide

Turnover is just for calculation purposes for if you need an audit or no, no need to put it on ITR4. You can show all positive turnovers for the year as purchases/receipts and negative turnover under sales.

Hi Mr. Nitin. Thanks for a great write up. My question is: If i have an amount of Rs 60,000 as interest from my savings account. My F&O loss is 100,000 Rs. Then what will be the loss carried forward. Should I apply section 80TTA of exempting Rs 10,000 from my savings interest before offseting. So will my loss carry forward be Rs 40,000 or Rs 50,000. Thanks. God bless.

Sir,
I am working in a MNC and my income is 15L/PA. My wife is house wife with no income. can she trade by her own and file separate ITR. If I trade in FnO and make profit of 1L then 30 percent tax slab is applicable. Is it same for her also?

If I didn’t have any taxable income at all (just 50K interest on FD’s & a few losses in stocks & futures) in financial year 14-15 but if I’m making good consistent profit right now (& at the present rate, it looks like I could exceed 2.5 lacs this year) then would I be required to pay advance tax by this 15th September?

I opened demat account in July 2015 and have purchased stocks. Suppose till the end of FY 2015, I do not sell any stock. In this case, should there be need to declare as invester/trader and which ITR form be filled ?

Nithin,
I don’t think we have to disclose the purchase details of Delivery based equity in the ITR.
Only on sale, purchase details are to be mentioned, to determine long or short term and gain or loss.
*Please do not mistake this for not having to file ITR for your other sources of Income for the year as it may result in getting Notice from the IT as they have a tracking system for a handful of high value outflow transactions covered under your PAN.

HELLO SIR,
In year 2015-16 My salary income is near to Rs 145000 & my speculation loss in cash segment is near to Rs66000. also I traded in F&o there my total purchase & sale approx
1.75-1.75cr in each side, my total profit trades is 76200 &losses is 53730. That means i made profit of 22470 in f&o segment it is without taxes & brokerage. So my question is whether I have to maintain books of accounts & require tax audit in this case, Because my total income is below than taxable slab, there is minimum tax liability of f&o income. What is last date of return filling in my case.

Hello Nithin,
In fy 2015-16 I traded only in options (options buying). and had the below incomes-
1. My Options turnover = 30,000 ; Loss made in options = 29,000 (Lost nearly all the money in buying options)
2. My income from fixed deposit’s interest = 50,000; TDS deducted by bank for Fixed deposit’s interest = 5,000
3. No further other income, only the above 2 sources of income and also I have not any carried forward losses from previous years.

Now do I have to go for tax audit, as I have made loss in trading ??(For your information, I will use ITR4 form and will show “Trading as a Business” and also please note that in my ITR form I will automatically have a demand of Rs 5,000 which got deducted as TDS for Fixed deposit, as you can see my total income is much much below than the tax exemption limit.) Please reply as soon as possible. Thanks in advance.

Dear nithin,
if turnover more than 1 crore and trade in cash market segment only(both intraday & short term delivery trades). have incurred profit in intraday and loss in short term delivery trades. therefore net loss is there. have other income as commission agent of 225000. is audit requirement is there to carry forward loss as non speculative loss. please reply. thanks

THANK YOU, for your quick reply. But i have read all your other replies & in most of them you have told if one don’t have taxable income, he/she doesn’t need to audit his books. please answer these
1. suppose my intraday profits are 5 lac & non speculative business loss is 18 lac therefore net loss is 13 lac with 6 to 8 crore turnover & with commission income of 2.25 lac, is audit required.
2. is this case is of section 44 AB, that is why you said for audit requirement.
3. is taxable income comes in picture in section 44 AD only.
Lastly, on behalf of entire stock market people i want to thank you and zerodha team.

1. If turnover is more than 1 crore, audit is mandatory. But note that it is not contract turnover I am talking about. Check the chapter on turnover. If turnover is less than 1 crore and you have no taxable income, then no audit required.
2. Yes
3. Yes

Just asking last time. Please do reply
1. Can it be possible that i show my short term delivery equity trades with high frequency as short term capital income or loss. also i have intraday trades.so that the loss i have as short term trades (non speculative loss) get into short term capital loss which i carry forward and my profits on intraday trade comes under taxable slabs.as if i don’t want to go for audit. is it possible.
2. if i declare short term capital loss then
a. can i claim all stt, brokerage,service tax,turnover and other taxes.as expenses or cost.
b. can i claim other expenses like reports,laptop, etc which support in trade.
THANKS.

1. No. Intraday has to be shown as speculative business.
2. No, if you are showing this as captial gain/loss, you can’t claim STT. But other than STT you can show it as cost of acquisition.
b. Yes, you can show it as improvement cost of the stocks you have bought.

THANKS & Good morning,
1. what i say is my INTRADAY (5 lac profit) will be shown as speculative income with my other income of commission income(2.25 lac) . will this all come under income tax slab only.
2. can i show all my non speculative equity delivery based trade (with 18 lac loss) with high turnover into SHORT TERM CAPITAL LOSS. so that i don’t have to go for audit & get file my return before 31 july.
actually i have fear for audit, as this will be my first time for audit if i go for it.

1.will i be able to deduct the trading brokerage, stt of trading part, & all other charges plus taxes of trading part as cost or expenses from 7.5 lac profit (intrading & commission income).
2. do i have to get audit done even if my intrading turnover is more than 1 crore.
3. Or trading turnover is just profit & losses summation.
4. Will i be able to carry my short term capital loss for 8 years forward.
5. can i deduct my previous year intraday losses with this profit.
please reply. THANK YOU & GOD BLESS YOU.

wonderfully written article. But I still feel, these taxation is still a confusing and dauting task for layman.

I do F&O trading, Equity as well. My income is net loss. Total turnover from F&O and equity is less than 5 lakhs.
1. Do I need to file the returns as I dont have a taxable income of more than 2.5 lakhs ?
2. If yes, do I need to file returns and ITR 4 is suitable for me ? and do i have to audit before filing returns ?

Sir, i am carrying forward a loss of Rs 2,00,000 from FY 2014-15 (previous year). This year FY 2015-16 I am having a net profit of 3 lakhs. Both are F&O. So now how much can I offset from this years profit. Any way 2,50,000 is exempt from tax. So can I just offset 50,000 and carry forward 1,50,000 loss to next FY. Or should I offset all 2Lakh and have no carry forward. Please advice. Thanks.

Hi Nithin,
The second rule of ITR4 where audit is required says” less than 1 crore and profit <8% of turnover", this means all those persons who are in loss have to go thru audit. I suppose more than 90% comes under this category. Don't you think this rule should be for good profit earners. If you analyse all members data of zerodha , how many comes under loosing category? Highly appreciate if you share these details and try to escalate this ridiculous rule.

sir while filing ITR 4 for income under 2.5 lacs i.e.tax free i want a bit of details … i will be very thankful if u tell me that …
while entering data for speculative (equity) profit and charges i put it in section section 36 of part P L .
now where will i put the data for non – speculative (FNO) income AND other charges like STT BROKERAGE stamp duty etc in the same PART P L in ITR 4 …
basically how and where to enter data for non – speculative income (fno) in itr 4…
thank you

You will have to enter speculative income details in schedule BP (point 2a), this is net (profit – charges).

In the Profit and loss on ITR 4, show the combined profit and loss of all activity. (Speculative and non-specu). As soon as you fill the above schedule BP, the ITR form will automatically reduce the speculative from total.

Hi
I suffered a loss of 2.5 lakhs in f&o and 50k in equity,my only income is from fixed deposit=7.5lakhs, i suppose loss will get offset from fd income, but audit is required for that, i have taken advise from local ca and he told me dont go for audit instead carry forward your loss for next year as according to him one who goes for audit it dept observe him very closely. I am in diemma pls what shold i do

Alok, the ITR form itself won’t allow you to carry forward the loss without an audit in your case, since your income is more than 2.5lks. I think you should consult another CA. And no of course, audit doesn’t mean someone is watching you closely, most CA’s do this just to bring in some kind of fear among people and to show that they are doing some special work.

last my salary is Rs.4 Lakhs
my f&o gross profit is 60,000
expenses like brokerage,stt,internet,rent is 65,000
my net loss is -5,000
my f&o turnover is 6,00,000
my question: audit is required or not…
as if i take gross profit of 60,000 and turnover of 6,00,000….profit is more than 8% of turnover…
but if i take net loss of -5,000 and turnover of 6,00,000… it is less than 8% of turnover…
so we should come to this audit decision based on gross profit divided by turnover or net profit divided by turnover ?

CURIOUS QUESTION
why did you tell someone by name VAMSHI (on july 16 2015 at 3.05 pm) “NOT to get her books audit when her turnover is more than 1 crore with intraday and shortterm trading loss to the extent of 4.14 lac, on the ground that she don’t have any tax liablity.
and you told me to get myself audit. as i have same case of high intraday and shortterm trade with 18 lac loss and 5 lac profit in intraday with high turnover.
there are many cases where you have said that one don’t need audit if one doesn’t have taxable income, even though turnover is more than 1 crore.
please reply

Dear sir, i am zerodha trader with id RC0258,i got a letter for non filing income tax return for fy 12-13,but till now all my capital is lossing ,for this fy 12-13 i loss everything .till now loss around 7-8 lakhs ,is there any penalty or action ITdepartment what shall i do now please guide me

Sir,
Your article on this tax matter is of great help. I am giving two hypothetical examples only to clear some doubts about Turnover calculation in FnO after going through your module.

1) A small trader trades daily in 1 lot of Futures. Out of 250 trading days in a year, he made Rs.1000 per day profit for 200 days and Rs.1000 per day loss for remaining 50 days. So his net profit is Rs. (2,00,000-50,000) = Rs.1,50,000. And turnover is Rs.2,50,000 as you wrote in Futures the absolute value of profit/loss is the turnover. So profit is 60% of turnover. Have I understood correct?

2) A small trader trades daily in 1 lot of options. Out of 250 trading days in a year, he made Rs.1000 per day profit for 200 days and Rs.1000 per day loss for remaining 50 days. So his net profit is Rs. (2,00,000-50,000) = Rs.1,50,000. But turnover becomes much more as the premium received on sale i.e. the sale value is included. Here apart from absolute value of profit/loss which is again Rs.2,50,000 we have to include sale value of options. Suppose the person trades with options trading at premium around Rs.200. So sale value of 1 lot option is Rs. (200*75) = Rs.15,000. In 250 trading days it becomes Rs. (15000*250) = Rs.37,50,000. Therefore total turnover in options = Rs.(2,50,000+37,50,000) = Rs.40,00,000. Then profit of Rs.1,50,000 is just 3.75% only. Have I understood correct?

Firstly wonderful article and thanks for that. Now I have just one doubt.

I head that STT is something like prepaid tax. So, can we deduct that STT at the time of paying tax?
For instance, I paid 10k rupees as STT all the year and at the end of the year, my I have to pay 1 Lack tax from my trading. Now can I deduct this 10k and pay 90k as tax?

WHAT documents or statement does a CA need to do audit.
1. do i have to do journal entry for each and every transaction & then make LEDGER OF books, & p&l account.
2. can i give my p&l account from broking firm, which includes everything. is that sufficient for my share business.
3. finally i can give a P & L which includes all my share profit or loss(summary from brokers P & l account) and other details.

I gave my CA as what you said (p&l of share trading), bank statement, brokerage ledger(contains details of bill with date). but he presist to maintain all books of accounts. like do journal for every transaction, main ledger accounts & then p& l account. i gave him the p&l statement of my broker which i think is fine. but he says it will be different from our angel. please help

Hi, I bought and sold shares in a particular financial year. In that F.Y, in April I had a loss of Rs.3400, in May I had a profit of Rs.54000 and in June I had a profit of Rs.4700. From July I began to incur loses. In July itself, I made a loss of Rs.2 lacs. And I just increased my losses from there. At the end of F.Y my loss from share activities stood at Rs. 6.7 lacs. My question is whether I was liable to pay advance tax because I was in profit for the 1st 3 months? Thanks. I was also in profit in month of September, I made Rs.10000 in September (just in September, overall I was in loss).

HOW TO CALCULATE TRADING & DELIVERY stt, stamp duty charges, turnover charges etc separately, AS my CA says he want separate charges for both trading & delivery. but i a single bill which include both trading & delivery, there is no separate charges. or can i show all this (trading plus delivery charges) as other cost.

Hi, please consider this question. A person ‘X’ started share trading in F.Y 14-15. He suffered total loss of Rs. 6.7 lacs from delivery based trading and intraday trading of stocks in that F.Y. He went to C.A to get his return filed and found that he needs to get his books of accounts audited. Now, this person didn’t know about what ‘books of accounts are. He had every receipt and detail of transaction he had made though. He gave all the information as asked by C.A and his audit was completed. His return was filed in due time (Form 3CB. Form 3CD etc). Now, the question is when this person asked that how he should maintain books of accounts, the C.A told him that it will only be required if income tax department raises any query. So, this person is little worried as he has no books of accounts with him. What should he do?

Ankit, CA’s tend to make keeping book of accounts sound scary. It is quite simple, if you are a retail trader, you anyways have all details on your P&L/trading ledger/Bank account. So like the CA said, nothing to worry.

Assume, If I’ve do the intraday on Option trading (very active trader with small profit in every trade- 5 to 10 transactions per day) and the turnover definitely cross above 1 crore in just 1 month or 2 months. So, the turnover of Option trading cross assault 10 to 12 crore and volume of transaction is too high.

In this case, how much maximum (approximately you given for audit) CA audit fee whether I’ll profit or loss in Option trading.

Hi. I have done some intraday trading in F.Y 2015-16. Total turn over of 1.6 lacs and profit of Rs. 23. I only traded for 8 days as I ran out of money. I was unemployed but I received my P.F amount of Rs. 3,60,000 which will be taxable as I left before 5 years. My question is, was I liable for an audit again?

In case you mean filing of return and not audit, then Yes filing Income tax return is mandatory and since your turnover is just 1.6 lacs, it is tax audit is not required and you can file returns by yourself without CA

i am government employ my sallary 13-14 year is 3 lakhs. i have 13-14 year intraday trading invest 2.5 lakhs and turnover is 3 crore but total loss . i have itr only sallery income. i have received income tax deparment and he say for penalty for intrday turnover amount. i have also submit audit paper last week. please suggest me i do

I got a IT scrutiny notification for FY2014-15 for ‘Security Transaction’. I did specullative trading on that year and made a loss of around 4 lac rupees. My turnover was around 40 Cr rupees. I have opted for online assessment processing as my ward is Bangalore. Currently I am in US and I provided annual report(Ledger and P&L) from broker to Accessing officer over mail. Please let me know if this is sufficient. I am bit afraid as what would happen now. If you have any idea please guide me. I filed IT return for that year as an NRI status as I was outside country more than 200 days.

Sir,
I am salaried person. When I filling IT return, I do not know to show intarday transaction in IT return. Then I got scrutiny letter from IT Office. My turn over is above 2 cores. Also I am in Loss in this year.What will be action taken by IT Office.please help me sir.Im in very deppressed mood.

Prashant, as long as you haven’t avoided paying taxes, it is okay. Tell the IT officer the same, that you didn’t file because you didn’t have to pay any tax as there was a loss. Nothing to worry. Best to file returns even if no taxes to pay.

Hi, consider a person ‘X’. He bought shares worth Rs. 3,60,000 in April, 2015. He sold shares worth Rs. 48000 in August, 2016 and got profit of Rs.9600. Is this person liable to pay any advance tax? He will probably sell rest of the shares too soon and his profit may reach to Rs. 1,20,000. Will then he be liable for advance tax? Thanks. This person has no other source of income as he is unemployed as of now.

Hi , I have annual salary – 5L.
I do merely lot of intraday in a year.
If I made profit 10 Lakh in a calendar year on 2015-2016
How much tax I should paid totally?
I am Zerodha user. How can I get a 1 year transaction trading details in a single Pdf?

I have been trading intraday as well as short term on Margin funding/ finance provided by the broker. Please advise if I can adjust / treat interest amount debited as expenses while arriving at the actual gains / business income made in the above activities. Also whether gains from the intra day trading can be adjusted against short term delivery losses of the same year considering the all the activities under business.

Dear Nithin, Can you help in clarifying the following – If you buy a bond on zerodha and sell it in the same Fin Year , then (a) will it be taxed as income or as capital gain etc. (b) will the Q.Zerodha capture the taxation when I generate my tax statement (c) if you buy a bond which matures in 1 month and in other words, you do not sell (i) Will this also show up in Zerodha taxable profit Loss AND (ii) will there be any difference in its being treated as income or capital gain. Thanks as always

1. Short term capital gain.
2. Taxes has to be paid by you, Q won’t capture how much tax to pay. It varies from person to person.
3. Yes all trades of bonds, show up on P&L. Treatment in terms of taxes may vary, you will have to research this based on the bond you are buying.

Sir,
I have 1.5 Lac loss in Commodity futures and 2 L profit from short tern capital gain and 1 L profit from Long tern capital gain. What is my net taxable Amount. can STCG and LTCG profit can be setoff with non speculative loss???????

Hi,
I am salaried person also trading part-time in F&O. I am getting 32k as HRA per month and paying 20k rent. If I claim tax benefit I get only 12k (20k – 10% of 80k basic). Is it possible to show 20k as business expenses in F&O income and not to claim any HRA in the salary income?

No, F&O has to be shown as business income. And it can’t be set off against STCG. But like I have explained earlier, if you are doing very active short term delivery trades, you can show that as a business income. Do read through all the chapters.

I am NRI [Individual] and have only F&O income [Non-speculative business income, as you have mentioned]. I would like to know how should I be calculating my tax – will it be, flat 30.9% on net profit or will the slabs of 2.5 Lakh (as in the example under 5.2 above) applicable?
My Bank keeps holding 30.9% of the profit in my ledger (may be considering as business income)!

Hi Sai, you will have to pay tax as per the IT slab. Upto 2.5lks nil, 2.5 to 5 10%, and so on. Your bank will deduct based on highest slab as TDS, but you can file your IT returns and claim for a tax refund.

first of all ….wonderful article. really helpful. Futher a small query, if i form a pvt. ltd. company to trade in shares then for non-F&O based trading what is the tax rate? is it 15% or is it normal corporate tax rate of around 30%. Also, if its 15% can we also reduce tax liability by our expenses (like office rental, salary etc). Thanking you in anticipation.

If you show it as capital gains, it will be 15%. You can show only related expenses as cost of improvement if STCG- things like transaction charges, cost of tips etc. Rental, salary, etc will not really be possible.

thanks for the reply. appreciate it. though i have a follow-up question on your choice of words. You said, “If you show it as capital gains, it will be 15%”….is there anything else that this profit could be shown as? It has to be shown as STCG right? Am i missing something ?

You have an option to show your equity delivery gains as non-speculative business income. In which case you have to pay taxes according to normal tax slab. But in this case, you can claim all expenses related to your business of trading (rental, internet, etc). Do go through all the chapters.

I am a salaried professional and made a loss of Rs.700 for the last two months (F&O trading).
1)Should I mention about this loss while filing the return next year during assessment?
2)From what I read no audit is required for salaried professional?
3)cant I set off the loss of Rs.700 against my salary (since I don’t have any other source of income)? are the rules still same?
4)is advanced tax applicalbe for salaried professional?
Thank You

1. Yes
2. Can you check the chapter on audit, it doesn’t matter if you are salaried or not, audit is determined by turnover that you do.
3. No, check all the chapters once.
4. NO need to pay if your income is only salary. Your company would be deducting TDS and paying.

I do only cnc i.e. delivery base but do it daily i.e. sometimes sell same day so intra day and and most times next day after its purchase but all on cash.
So should its intraday to be speculative income and that one which i do daily but sell next day of its puchase to be considered as speculative or non speculative as i m paying STT.

Also if non speculative then turnover wil be sel price minus puchase price ?
Pls help

Hi nithin,
After my father’s demise my mother gets pension of rs. 21600/- per month. my father was government servant. if calculated annually it goes 21600*12=259200. My mother has no income other than this. is she liable to pay tax?

1) Declare myself as both “Investor” and “Trader” (Last FY, I was only investor. Only stock/MF investment and no Intraday / F&O trading)
2) Use ITR 4 for filing return
3) STCG from PMS & Equity MF to be reported under Capital gain section with concessional tax rate (15% on equity). No tax on Liquid Bees as the gain is always ZERO there.
4) Long term gain (> 1year) from PMS, Equity MF and my direct stock investment under Exempt Income with 0% tax
5) Short term gain (< 1 year) on direct equity investment, Intraday and F&O under Business Income with tax rate as based on slab. Audit from CA based on business turnover and reported profit.

1. Yes
2. Yes
3. Yes. Btw, from this FY dividends are taxable if total dividend income above Rs 10lks per year. 10% over and above 10lks.
4. Yes
5. Yes. Intraday as speculative, short term and F&O as non-speculative business income. Short term equity investments can also be declared as capital gains if this is not extremely active.

On #5, I would have 24 equity delivery trades in the current FY qualifying for STCG (holding < 1 year), roughly 2 per month. I intent to show them under STCG to avail 15% tax. Trust it would be fine. Many Thanks in advance

Hi Nithin,
First of all, thanks for your nice help with these articles. These modules are all very helpful and very informative.
–
I have a question on the Advance Tax payment. Let me take my real life example to frame the question better.
I have a net profit of Rs 20,000 till date in Short Term Equity Trading (no intraday, mostly 1 week to 1 month holding period). Ideally I should pay an advance tax on this 20K. But I am also planning to take help from the Loss Harvesting. I have some other equities in my portfolio where I am making a loss more than 20K. I did not sell them, I want to hold them because I believe they will eventually recover. Sometime between now and March 31st, I will sell them & book the loss, and I will immed buy back those again. This will offset the profit of 20K for this financial year. Since I am already certain of doing this, do I still need to pay an advance tax for the 20K profit (& claim it later when I file), or can I ignore the advance tax payment ? Please confirm.
Secondly, if I do this offset just on 30th or 31st March, do I still owe a tax (or interest) to the govt for the 3 months period from now till March end ? Or is it okay not to pay any tax (or interest) as long as my net profit as on 31st March is less than 0…. I actually made this 20K profit in Sep-Oct. So I guess even if I offset the profit with a loss in March, the incometax dept would still expect me to pay an advance tax in Oct and then claim it back after the year end when I will show net profit as zero. So, not doing that would attract an interest charge to me. If I offset the profit, there wont be any tax payable – but what about the interest charge ? Will they zero down that or will I have to pay it ? Please clarify.
–
Thanks if advance for your assistance & help.

I need to know whether Audit is required for me.
I am salaried employee. I did Intraday trading in equity for 3-4 months and incurred loss of about 45000. I also did short term delivery based equity trading and incurred loss of around 6000.

Total buy/Sell in intraday: Above 2 Crores
Total buy/Sell in short term delivery based : 2 Lakhs

Please look at the chapter on turnover, turnover is not trading volume, it is absolute sum of profits and losses. I doubt if it will be Rs 2crores for you. But anyways, yeah you would need an audit if you have taxes to pay and if your profitability is less than 8% of your turnover.

Dear Nitin and Zerodha team,
Please help me regarding my IT return.
query 1 I am not able to see charges for F.y. 15-16 in Q zerodha back office. It is showing 0 everywhere. Please send me or tell me how can i see total charges details with breakup.
Secondly please help me for following also.
I had filed my return of F.Y. 15-16 before extended due date i.e. 5-8-16 but i didn’t show my trading loss.
query 2 Now i want to revise that return to show and carry forward trading losses as business losses. I have only acc in F&O segment. Can i do so.?

To carry forward a loss, you need to file your returns within time. Since you haven’t you will not be able to carry forward those losses. But if you have missed out mentioning, you can still revise your return.
If you can look at the chapter on ITR forms, I have shown what figures to show where.

Since your turnover is over 1 crore for last FY, you will ideally need to get audit. Do go through all the chapters of this module.

If you are not seeing charges, can you email [email protected]
I will do the same thank you for solution

To carry forward a loss, you need to file your returns within time. Since you haven’t you will not be able to carry forward those losses. But if you have missed out mentioning, you can still revise your return.

No i have filed return in time but not mentioned losses. So now revising return with claim of losses. So my question is can i do so?

If you can look at the chapter on ITR forms, I have shown what figures to show where.
Thank you indeed helpful i will check same.

Since your turnover is over 1 crore for last FY, you will ideally need to get audit. Do go through all the chapters of this module.
No if you see my turnover is somewhere Rs. 11.96 Lakhs but losses are inviting tax audit u/s 44AB. However please see my return part and then please advice.
Suppose i am having other income from business Rs. 350000
And derivative trading losses Rs. 20000
and brokerages and other charges rs. 30000
So total loss claim of trading is Rs. 50000
My income will be Rs. 300000
and my 80C investments is Rs. 40000
Now Total income is Rs. 260000 i.e. above 250000
and i claim rebate U/S 87A for Rs. 1000
Tax liability NIL

Anooj, yeah, since you have tax to pay and your profit is less than 8% of turnover, you need to get your books audited. An easier way for you would be to declare 8% of your turnover as profits and pay taxes on that. Around 80k profits (on 10lks turnover) and @10% slab it is 8k in taxes. You could increase your 80C or others to cover for this 80k increase in income. Calculation of turnover, you could use an aggressive approach as well to reduce your turnover. Best to consult a CA.

I am a Government servant and I was trading during my free time regularly. For the year 2014-15 ( Assessment year 2015-16) I had filed returns like regular salaried employee as I have made losses in trading. My taxable salary income was 11,36,180 after all deductions and I paid Rs 1,70,830 as gross income tax ( inclusive of Edu cess). My net loss from trading is -3,06,048.75 in addition to charges of 1,09,867.88 total loss of -4,15,916.63 Now I have received an Income tax notice for checking the tax returns again as I have not included trading. Am I required to pay taxes again. How to show them my traded details? From where I can download the accounts with my Demat account mentioned. Please provide the help. Thank you.

Since you have lost money, there is no taxes you have to pay. I guess the notice is because you have not shown this trading business on your ITR. You will have to revise your ITR, use ITR4 and show these losses on them. Do consult a CA to fill this for you, nothing to worry about this. You can get a P&L statement, ledger (all money moved in and out) from your broker. You can use this to show the ITO that there was a loss .

Boss i will be finished do u know? Since you are saying you have to get audit done. Then how possible? Time has gone. and now if i show anything wrong penalty of Rs. 1.5 lakhs for non audit will levy. Please review your chapters as they are misleading most places and cause serious damage to public on ill advisory. Don’t get me wrong? Issue is so complex and views of different high courts are also different on treatment of derivative PL as speculative or non speculative. Delhi court said its speculative loss/income but Kolkata high court said its business PL i.e. non speculative.

If I have no Salary income and have only profits from Short Term Capital Gain from Equity, Bank FDs, Dividends, adding all if I am still below INR 2.5 Lakhs –
1. Do I still need to file returns?
2. Will I have to still pay tax for the STCG @15% for the profits?

sir for eg i have a loss in trading in past 7 years and make it up the loss in 8th year now i nt need to pay any tax write? my question is past 7 yr loss is 20lakhs 8th yr profit is 40 lakhs now difference is 20 lakhs. past 8yrs i nt avail any tax benefit. can i adjust my 20 lakhs profit ie 2.5L per yr no tax x 8 yrs = 20 L

🙂 No. You will be able to setoff only the losses that got carried forward, in your case 20lks. You will have to pay taxes on the remaining Rs 20lks. Btw, losses can be carried forward only if you file your returns on time.

Sir still now I nt file it return from 2010 to 2016. Intraday loss 4 lakhs b4 2013 now four yrs gone so can’t offset. Their is any possible to file my loss previous 4 yrs back ? Bcz 15L in f&o loss
Advise me. I plan to restart my trading and avail 10L tax slab bracket for few years

1. I am trading since 2011 . 2011 to 2013 – I was student and was having fund of max Rs 25000 and was doing intra day trading only . but i dont know why while checking in income tax site I got notification of CIB-502: Contract of Rs. 10,00,000/-or more in the Commodities for 2012-13 . This cannot be true .
2. Another one is like STT03 -sale of equity share (settled otherwise than by actually delivery or transfer) in a recognised stock exchange. for time period 2012-13 . Does it simple mean that it was cash and carry forward condition. If thats true then its fine I would have carried some shares on delivery .
3. I started doing my Job in Big MNC from Jan 2013 , Why I have mentioned the word Big MNC because I have not received form 16 from them for the year 2013-14 . Although I have received form 16 for all the consecutive years until now and I have files all ITR f0r 2014-15 , 2015-16 , 2016-17 . The result is I was not able to file 203-14 ITR as I was the fresher in the corporate world , So I was not aware of this ITR stuff and all and also I have not received Form 16 as well while checking now in mails . I am non complaint for 2013-14 ITR filing .
4. I have done hell lot of tradings in options from last year and the result is I am in Net loss (Profit+Loss combined) of around Rs 12 Lakhs. The point is that will they not care about this ? and they will just focus on my profits and ask for tax on that ? The 12 Lakh loss is like say 17 lakh loss and 5 lakh profits . So 17 – 5 = 12 Lakhs (Net Loss). Does it mean that 5 lakh would be taxable ?

Please guide . I have also sent my documents to zerodha for new account opening . They have received it today in bangalore office . I can see in my past staements I have paid like 4-5 lakhs brokerage alone to HDFC SEC . I am repenting so much to not to witch to discounted brokerage firm. These big names costs a lot to customers like what airtel has done so far . Jio/Zerodha came to rescue now .

1/2. These notices are going to people automated who have traded but haven’t filed IT returns or not declared in IT returns.
3. Did you make profits in those years when you didn’t file ITR? If you have, then you will have to pay tax on that with penalty now. Again tax only if you made profits more than minimum income tax slabs then. You have to reply to those notices saying that you didn’t have any tax liability
4. ah no, you have to pay tax only if you make a net profit.

Hi Nithin ,
I came to know today that you are Founder and CEO of Zerodha. WOW ! You are doing an excellent job !!! This is to inform you that some backoffice account is opened for me now . So whilst trying to add funds in trading account , faced lot of difficulties . Zerodha’s account belongs to HDFC Bangalore , Mine is also of HDFC Bangalore , So it should be smooth like anything ! LOL .
Followed that screenshot uplaoding procedure too but that system is throwing some validation error even after 4 eye checks .
P.S : I know this is taxation forum and I have added funds related query .Sorry 🙂

Hey VR, if you are transferring from HDFC to HDFC, you don’t need to upload any screenshots, the funds automatically get updated on the trading front end. Btw check out Zconnect for Zerodha specific queries. Stay active on these forums as it helps me stay connected with any issues. 🙂

Hi, i have two doubts
1. i heard that we need to pay 35% tax for intraday profits is that true?
2. in that case, let’s say i am NOT employed and i only do intraday trading. and i made 5 Laks profit in last year.
so i will pay 35% on short term capital gain + my regular income tax 10% (175000+25000 = 200000) is it so?

Taxes have to be paid according to tax slabs. Can you read through the entire module.
1. 30% is the highest slab (income above Rs 10lks)
2. For the first 2.5lks u won’t pay any tax, next 2.5lks u pay 10% or Rs 25000. If you are employed, you have to add Rs 5lks profit to your salary income and then pay tax according to the slab.

Ah no, 33% (10% of 30% is additional for people earning above 50lks, and 15% of 30% for more than 1 crore). So for above 50lks it is 33% and above 1 crore 34.5%. Tax hike for people between 50 lks to 1 crore would be from next financial year.

I’ve been trading F&O since 2015.
2015- Received a Substitute 1099 /B Statement from Broker. Profit/(loss) 2 000
2016- Same document. Profit/ (loss) 3000
I did not put any info last year on my tax return about trading. I don’t have any income this year but I do file my income tax return with my wife, and she receives a salary.
Do I have to pay taxes for the trading activity (loss)? If so, not sure if I have to declare a new business (trader business) and what is the code for that. Can I include loss from 2015?

Taxes need to be paid only if you earn/make profits, not on losses. You can rectify the returns from the previous year, but you can’t add that loss to this year. ALso, it is best you declare your trading income, even if you don’t fall under any IT slab.

Sir,
I have income 170000 p.a. for FY 2014-15 and trading loss is 94000 in F&O segment. I have not file ITR for this FY. But now I got the Notice from income tax department as non filer and showing these transactions are done through my PAN no.
2014-15 CIB-502 contract of Rs.10,00,000/- or more in the commodities exchange
2014-15 STT-04 sale of option in securities (derivative) in a recognised stock exchange.
2014-15 STT-05 sale of futures (derivative) in a recognised stock exchange.

You can reply to the notice saying why you hadn’t declared your trading income (since you didn’t come under a tax slab and also had losses in F&O). Show your P&L for that year along with bank transfer to and from the trading account. You should be alright.

I got the Notice fromIT dept. as following
2014-15 CIB-502 contract of Rs.10,00,000/- or more in the commodities exchange
But when I see my P/L report for commodity it shows total turnover of Rs. 15,505/- for FY 2014-15
What does they mean by contract of Rs.10,00,000/ ?

Ah the IT department notice is just contract turnover, if you have bought 1lot of gold and sold 1 lot, that is 60lks turnover for them. Don’t bother about the turnover, make sure to respond to the notice.

I am planning to trade in the name of my father as I am government employee and speculative trading is not allowed. Kindly let me know who has to show capital gains in their ITR. My father has retired and has no source of Income.

Hi Sir, if i pay for CA to do audit an amount of Rs 12,000 to 15,000 – does that include for audit this year and also while filing for next year? so if I pay for CA then they would help me do audits for two financial years. please clarify. thanks.

Hai, I am new to trading. I don’t have any other income except this. I hope I can pay the tax as per normal tax slab. My doubt is I have my savings in hand, if I am investing more than 3 lakh in the same year should I pay any tax. If yes in what basis? And that income has gained for 5 years ( not exceeding every year in the income tax slab)

Dear Sir,
I have been doing this intraday trading for about six months on Zerodha the excellent brokerage Platform .I have been receiving awesome service support from concerned Zerodha personnel for which conveying my sincere thanks to all.However ,I need a small clarification on taxation aspect.
My P&L details as of now i.e 16/03/2017 are as follows as per the P&L statement shown in Q-Back office:
A)NSE-FO:Realised Profit +Rs 7,094.25 while total brokerage and other charges appears to be Rs 28,016.09. Accordingly the Net realized profit works out to –Rs 20,921.84/-.The turnover is working out to Rs 42,741.75.
B)NSE-EQ:Realised Profit -Rs 8,384.50 while total brokerage and other charges appears to be Rs 27,283.95.Accordingly the Net realized profit works out to –Rs 35,668.45/-. The turnover is working out to Rs 64,381.00.
Q 1:As per the wonderful date furnished by Zedodha in Varsity,I will use ITR 4 form for submitting returns scheduled to be submitted before 31 st July 2017. Since I have incurred some non-speculative F&O trading loss, this can be set-off against other income like rent & FD interest etc.I am a retired person and hence no other income like Salary. Since the NSE FO profit of Rs 7,094.25 on the Turnover of Rs 42,741.75 is working out to 16.59% i.e not below 8% of turn over,I need not arrange any audit as far as the profit obtained and also basing on turn over .Please confirm whether my understanding is correct as above?
Q 2:Whether this NSE FO loss and NSE EQ loss can be set off against other incomes like interest,Rentals etc ?

Hi Nithin,
Thanks a lot for putting up this page! I have a specific question. If, lets say, I have 100 Shares of company X in my account which i purchased 6 months back. Now, today, I trade (Sell first and then buy) 100 shares making a profit of total 100 Rs. At the end of the day, my account will continue to have 100 shares and I come out with a profit of 100 Rs. The question is, will this 100 Rs. be treated as Intraday profit or Short term gain? Although I understand that they are taxed the same way but I want to be sure that if after 6 months from today when I sell the 100 balance shares in my account, will I count that as Long term (1 year ) capital gain or short term (6 month) profit ?

Hi Nithin,
I have 2 queries w.r.t. the Tax Harvesting concept. And now I am more confused looking at your reply to Vagisha just above. This is regarding the technicalities in the way Tax Harvesting is to be done. I never did it till date.
–
Query 1: I had 200 shares of Coal India on which I was making 4K loss. I thought of adjusting the same against my other STCG profit. So today, I first bought 200 additional shares and then sold 200 shares. But you said to Vagisha’s query that, it will be treated as intraday. So my loss of 4K is not adjusted to my other STCG profits. How are we supposed to execute such trade in order to have it not fall under intraday ? Should we sell and wait for a day and only then buy back ? But in that case, we cannot ensure that we are getting the shares at the same price. Even in your article you said – “immediately getting back on the same trade”. But then it will be treated as intraday na ? It won’t help us book the loss.
–
Query 2: If you see carefully, myself and Vagisha did it in 2 different sequences. We both had some shares in our demat. I first bought additional shares and then sold. Vagisha first sold and then bought back. Does this sequence impact how the transaction will be treated, or are they both considered as intraday ? If both are intraday, how do we do tax harvesting without a price-risk ?
–
Thanks in advance for your valuable suggestion & help.

1. Yep, you can’t sell and buy back and consider it as tax loss harvesting. I haven’t said that anywhere. What you can do is sell on one exchange and buyback on the other. In such a case, the shares are actually delivered to the other exchange.
2. They are both intraday. Sell on NSE, buy back on BSE or vice versa.

Thanks Nithin for the clarification. I would suggest to update the course material to highlight this use of 2 different exchanges for tax loss harvesting. It is a very useful suggestion which you provided. I think the original course material does not have it explicitly written. Some new comer like me might get confused. Thanks for your help.

Hi Nithin Sir,
Kindly guide me about my quiry:
I have income below 2.5 lacs and f & O Loss of 78000 rs with HAVING just 90 scprit(total 180 entries with BUY And SELL)transaction in P N L statement of FY 2015-16.
Q: (1)which itr to be filled ?
(2)is it auditable ?
(3)should i even have to fill return ?

AS PER VARSITY TOPIC —— Turnover and Tax audit
When is audit required?
An audit is required if you have a business income and if your business turnover is more than Rs 2 crores (was Rs 1 crore until FY 16/17) for the given financial year. Audit is also required as per section 44AD in cases where turnover is less than Rs.2 Crores but profits are lesser than 8% of the turnover and total income is above minimum exemption limit.
HOW MY CASE IS AUDITABLE ??

sir
your answers are bit CONFUSING……
you answer to first question of this chapter of ARSHDEEP…
1. If your net income for the year (trading + everything else) is less than 2.5lks, you don’t have to pay any taxes, and hence no audit will be required. But if your net income for the year is above 2.5lks and if you make a trading loss (F&O or intraday equity), yep you need to get an audit.
AND YOU TELLING ME TO GO THROUGH AUDIT EVEN MY INCOME BELOW 2.5 LAKHS.

Hi Nithin Sir,
rather taxation related to trading is confusing for ordinary people.
and are doing great on this part with spreding out tax literacy among the investor and traders.
i have been confused about audited part…
thanking you for your responce…

[28/03, 10:58 pm] Puja Gupta: Income tax liability. PL advise if a person incurred loss in F ND O stock trading still he has to file income tax return.More over if he earns profit what percentage of profit he should deposit to Income authority.Apart from this what is turn over limit of trade to be audited in a FY. My ref DP1952:advising mob 9358114248 no ND E mail [email protected] .Matter urgent please sdvice.

Puja, if you can go through all chapters of this module, all your questions are answered. No quick answers to this. Yes even in loss, best to file ITR if trading on markets. Profit gets added to your income and tax paid according to the income tax slab. If turnover more than 2 crores or if profit less than 8% of turnover, audit required.

Thanks Nitin. BTW .. I really appreciate you taking your personal time and helping the community members with their queries (most of the time repetitive queries) .. People like you are are very rare nowadays. I wish i could be like you. 🙂
Also, I have been reading your replies in past 2 days on various threads .. you have great patience 🙂

Coming back to the topic –

“Absolute sum of all profits and losses” being 2+ CR !! wow !!!!!! we have some good traders here then 🙂

Just to be sure again Nitin,

If I BUY NIFTY 3000 shares @ 9000 and SELL @ 9001 and I repeat this 100 times in a financial year.
So for income tax perspective my turnover is 3000*1*100 = INR 3,00,000 right ? and not INR 5,40,03,00000.

Hi Nithin – I am a Zerodha Trading Account holder & my only income (or loss) is from Stock trading (Intraday & Delivery), wanted to check which ITR Form needs to be filled in? and does it require any CA assistance. Thanks in Advance.

1. I am having a short-term profit of 10000Rs for this year along with a salary income. Last year, I had filed my IT returns on ITR-2 with 9000Rs loss
Total turnover this year : 150000
Should I file ITR-2 this year or ITR-1? As there are changes done in ITR forms this year as per this link https://blog.tax2win.in/new-itr-forms/

2. Also will there be any difference if I file IT Returns for wife’s account where she made a profit of 10000Rs (only short term profits in equity, No FNO transactions)in 2016-17 (No other income)

I am a mtech student and receives 12,400 as a stipend from mhrd and i have no other income sources …i got around 6.25 lakh as a profit in F&O so during calculation for my tax stipend money counted as my income or not?

I had a question?
If I had filled ITR4 last year due to loss so that i could carry forward the loss. My main income is from salary.
N dis yr if the trading turnover is less then 1 cr and in profit, which itr do I need to file?
Do i need CA to file dis year ITR also or can i do in on my own?
Do I need to maintain book of accounts and i need to file ITR1?

i wanted to know that if turnover is 1.9 crore of which loss is 30 lacs,
and the only business is trading.
is audit required?

and also if we carry forward these losses under business as trading
and next year change business as a consultant?
can we offset the losses of trading with the consultancy business in subsequent years?

Thank you for this wondrful and simple explanation. Also appreciate how responsive you have been and how much effort has been put to keep this page updated and relevant (for example, it was updated that as per this years needs, people have to fill ITR3 and not ITR 4 anymore).

My question is slightly tangential yet relevant and it is the following – What if the person derives profits by solely trading F&O globally, i.e. not in markets in India but in markets abroad. Will all the above set of rules about taxation, tax rates, tax slabs, audit needs as per turnover and profit %, need to declare it as a non-speculative business income etc remain the same or will there be any new colour or method to tackle that situation. Any pointers will be of help.

Thanks Ajit. Resident Indians aren’t allowed to trade international derivatives. If money is taken out in the LRS scheme, it can be used for only delivery based trades. But yeah, if you have international income, you’d have to first pay taxes as per the law of land whichever country you are trading from. Once the money comes back to India, you can get rebate of whatever tax paid in the other country.

am an active f&O trader. last year i got my books audit. but this year my turnover is less than 50 lacs and profit is just 30k. my total income including salary is less than 2.5 lacs. do i have to get my books audit this year also?”

hi,
i ve received a mail regarding submission of statement of financial transaction and form61 A filing..
last financial year my income is below taxable limit (im a day trader by profession)..and i did not have any high value transactions..
my question is..what is this form 61 A and is it compulsory to file it even though there are no high value transactions ?
will be really helpful, if you could guide in the right direction..
thanks..

Hi Nitin,
I had read quite a few articles on Zerodha and liked it. I had a few queries, if you could guide please?
1. I am new to share market and mostly take deliveries of shares and on very few occasions have done intraday (total profit of about Rs250 and no loss), I am a salaried individual, and was filing ITR1 till last year. Should I file ITR2 this year?
2. Can I deduct Demat transaction charges , brokerage charges and Demat AMC from my total profit to arrive at taxable profit amount?
3. Just to confirm I read that STT cannot be offset from profit, which means I have to add STT paid to my net profit before arriving at taxable amount? eg. Net profit in hand (made via delivery based trading) is say Rs. 500. Although I did not get the STT amount(RS 10), I need to add this amount and pay tax on Rs 500 + Rs. 10 = Rs 510
Please clarify if possible.

Hello,i am confused with the first example given at the beginning of the chapter.The total income is shown as 12,00,000 and tax liability is shown as 1,85,000,how is this calculated? the tax should be 30% of 12 lakhs.

Hi, my salary is 500000 and my turnover is more than 2 crore . During financial year in first month I got profit of 7 lakh and in next month I lost 6 lakh in intraday trading, so my question is on how much money I need to pay tax ex. 5+7 =11 or 5+7-6=6 lakh.. Please help

1. Whatever loss came, I am okay for that and do not want to file ITR. Is that okay and fine as I feel that my total income is not exceeding 2.5L ?

2. If at all i have to file, then which ITR is best to use and how can my above transactions(business or short term) to be shown to make things simpler and to avoid CA or audit ?

3. I need to pay some advance tax only when my total income crosses 2.5Lakh right ? If I am sure that my total income will not cross 2.5L limit, do i still need to pay advance tax ?

4. One of my friend has a question, Her short term turnover is above 1 crore, but her profit is very less than 6 % of turnover and also she has no other incom which means she has total income of around just 1L for that year. In this case, does she need to file ITR and if so, which form and is audit required ?

5. Another general question, If I have long term capital gain from equity mutual fund of around 1.5Lakhs (which is tax exempted) and have interest of around 50K(Fixed deposit). Do I need to mention 1.5L from MF in ITR or i have to just mention only the interest of 50K in ITR ?

1. Technically you don’t need to file ITR. But it is always better, you might get one of those automated notices asking why you haven’t filed even though you are investing/trading.
2. ITR3, since your turnover is extremely less, there will be no need of audit.
3. You don’t have to pay advance tax. Yes, you are right.
4. If equity delivery investing is all she is doing, then she can show this as capital gain. There is no concept of calculating turnover/audit requirement in that case.
5. You have to mention the long term gain in your ITR, it automatically will take it as exempt income.

For the Question 4, She has done intraday trading also. Below is her report,
INTRADAY GROSS PROFIT ₹87,953.32
INTRADAY TURNOVER ₹1,01,546.22
SHORT TERM GROSS PROFIT ₹-1,83,060.61
SHORT TERM TURNOVER ₹1,09,50,682.13

Her short term turnover is above 1 crore, but her profit is very less than 6 % of turnover and also she has no other incom which means she has total income of around just 1L for that year. In this case, 1. does she need to file ITR and if so, 2. which form and is audit required ?

Even though income is under taxable income, it is best to file ITR. If you don’t file there is a small risk of getting a notice asking you why you haven’t filed even though there are transactions on the stock market. So ITR4 and yeah best to get it audited since the turnover is more.

If I were to take a personal loan and use the amount to trade in F&O, what would be the treatment of outgoing EMIs. Can they be treated as business expenses? Asking it because i didn’t see a mention of the same in the article.

Plus my total taxable income from salary is 275810. I used Cleartax with Salary and Short Term Capital Gains, it shows no tax liability and a refund also ( mostly tax deducted from bank). So do I need to get a audit here or I can just don’t mention little intraday turnover of Rs 5966 in the ITR forms??

Short term turnover is above 1 crore, but profit is very less than 6 % of turnover and also no other income. In this case,
1. Is it fine not to file ITR ?
2. If ITR is required, which ITR form to be used ?
3. Is Audit required ?

1. Best to file, since there is decent amount of turnover.
2. ITR3 to declare capital gains and business income (intraday).
3. Short term turnover if shown as capital gains, no audit requirement. Intraday your turnover is small and profit more than 6% of turnover, so audit not required.

I am availing of TradeTax’s tax filing services since it’s your partner and geared for traders.

My turnover is less than 2 crores but my net income is negative. So according to my understanding from your taxation module, since my turnover is less than 2 crores, my profit is less than 8% of turnover and my income is less than 2.5 lakhs, I don’t need an audit. However the TradeTax CA said since I have to show losses, it’s compulsory to get an audit.

Hi Sir,
I don’t have salary income.
FD interest income: 85000
Equity Cash – delivery Turnover: 41,00,000 (Forty one lakhs).
No Intraday or F&O
Short term Capital Gains: 5900/-
Shall I fill ITR-2, and also no audit is required right Sir, if I understood correctly.

Thank you sir,
I have asked CA for ITR 2 and also getting audited.
what are all the documents he will give me after auditing.
and These audited docs should I keep with me for future reference or should I upload some where ?
I am from Tier-2 city don’t want to go only by my CA’s word. So double checking.

I have short term delivery based turnover of 85 lac(on sell side) & intraday turnover (i.e, summarization of intraday profit & loss) is 932000.
my net position is short term delivery trade = loss is 14 lac and intraday day = net loss is 2 lac. therefore net total loss = 16 lac
i declare myself as trader and treat trading as business income. i don’t have any other source of income. therefore pls answer
1. do i need to go for audit . please clarify also.
2. do i need to maintain books of accounts.
3. can i carry this loss(16 lac) without audit to be carried forward. as most of people said though my turnover is less than 2 crore, but i have substantial losses, so it is better to get audit done. please share your views on this matter.

Suppose,If I received dividends worth Rs.5000 in financial year 2016-2017, can I use ITR 1 form to file returns and declare the same Rs.5000 in 80TTA section.(as the amount is less than 10000)? Or should 80TTA section be used only specifically for interest recieved on savings account.

IN CONTINUATION OF MY QUESTION ON 15 JUNE 2017 & YOUR REPLY, I WANT TO ADD THAT IF I HAVE A COMMISSION INCOME OF 2.25 LAC AND NET LOSS OF AROUND 16 LAC & TURNOVER OF AROUND 85 LAC (vastly explain above). then also i don’t have to go for audit, as my income is less than 2.50 lac. please clarify.

Hello i have only a trading income, no other income and i have made a gain of 14256 after Setting off all the Profits and losses i have made, My purchases total amounts to 694019 and sales have totalled 355051 and some equitys are lying can u suggest whether i need to pay any tax on the gain i have made.

I had a turnover of 50 lacks and incurred a loss of 230000 in F&O trading. My salaried income was 600000 and filed ITR1 instead of ITR4
resulted in not showing trading losses. So i got a notice from income tax officer for scrutiny and now he is asking me to pay tax on 8% of income on 50 lacks. Even i had a loss he is asking me to pay tax. So i need your suggestion on this. Is there any way i can avoid paying tax?

Hmm.. Neel the 50lks of turnover the way you have calculated might be to determine if u need an audit or not. You can ledger book, show sum of all settlement credits and debits as turnover and maybe pay tax on 8% of that. It will be I am guessing much lesser than the 50lks u have calculated. If he is demanding, there is no real way to avoid. But you can show this turnover much lesser and pay lesser.

hello nitin bhai, I am a clinet of zerodha, I am a govt. serviceman,zerodha clinet id -RM4007, actually it is registered in my wife’s name, she is a housewife. I generally do commodity trading. The bank account linked with trading account is joint account with my wife. Now i have some profits less than 2.5 lakhs. Please tell me while filling income tax, how to file these profits, i mean, as income of my wife or as income of me? After reading some online sites, I am confused. I generally file ITR 1.

Sir i have a query. In 2016-17 as per zerodha site
COMMODITY TRADING TURNOVER :- 313000
loss is 74000.
So as i am in loss, is file is mandatory or not. suppose I am not want to carry forward the loss.Please reply thanks

Hi Nithin,
I am a salaried employee (~4.2 lpa) and i did intraday equity trading with turnover ~1300/-, gross profit ~20/-, charges ~300/-. I am also holding some shares for about 9 months (i started trading less than a year ago). So which ITR I need to use? can I use ITR4/4s and declare profit as 8% of turnover? do i need to declare any Capital gains?

Thanks for the reply Nithin. my doubt is, i did not get any profits from my holding as i am still holding them. i want to keep them as long term investment (more than 1 year). in that case how should i declare them? can i show the holdings as investments or i need to provide profit/loss details on these holdings.

Sir, I have a trading account at Zerodha platform. This account has F&O turnover of above 1 Cr in FY 17. As the account is for personal capacity (not a registered business or any entity), do I need the account to get audited? Please note that my income source is only the salary which I get from my employer. Thanks in advance for suggestion.

Dear sir
I hv zerodha account. I m h/w and my only income For year 2016-2017 is mentioned below :
Turnover MCC commodity. Rs 70,000.00
Profit rs. 40228.00
Fixed deposit interest 15000,
My query
1. I need audit of account?
2. Which ITR FORM to be used.
3. Is it required to submit turnover and p&l statement and fd interest proof while filing it return.
Or just I have to keep the record for future.
Pls guide mr.

Thanks sir for the reply.
I read the turnover chapter and I understand that since my turnover is rs 70000 (less than 1 or 2 cr) and profit (earn from commodity and f n o) is more than 6% so I don’t required audit of my account and need to file using ITR 3 .

My income as Salary -620000, Interest 58250 out of which claimed 10000 u/s 80tta.. ST capital gain 2789, intra day loss 587 ( turnover 44889), professional income (ins commsn)171 and iam claiming 150000 under 80c and 7958 under 80D… Audit is required for this? or i can file myself using ITR3? previous year i filed ITR4S as no cgt/ intra day transaction. kindly guide me. Thanks

Since your turnover is less, you can maybe declare 8% of this turnover as profit and let go of the loss. This way you can avoid audit. Otherwise, since profit is less than 8% of turnover, audit will be required.

Thanks for your reply. I have a query reg speculation loss (intra day loss Rs 587 mentioned above it is 554). I traded through demat account from September 2016. For short term trade- Sale value Rs 54,351 & Cost value Rs 51,833 , so i considered this as Short term gain Rs 2518 @15% CGT, For Long term, Sale value Rs 3221 & Cost Value Rs 2904 as a result of Long term gain Rs 316 which is exempted from tax i believe. Regarding Intra-day transaction, Sale value Rs 48,991 & Cost value Rs 49,545 as a net result of Rs.554. When i read about turnover, sum of both positive or negative from trade as Turnover. My question is Turnover and profit/loss from intra-day are same? In my case, SV 48,991 & CV 49,545 so the difference is minus 554.

Apart from above trading, I have an insurance income Rs 1064 (out of which i claim Adhoc expenses Rs 354), so i declare professional income Rs.709. Also I have a salary income Rs620,000. Kindly advise how to declare intra day transaction in IT return as the net figure is minus 554.

Hello Nithin Sir,
Thanks for your reply. I have calculated my turnover for intr-day transaction as Rs 679.95 (based on absolute positive and negative transaction). Shall i declare profit Rs. 54.40 (i.e 8% of Rs679.95) and show it as Serial no.53(i) of profit & loss account in ITR3 (i.e.presumptive business income i think), Apart from this i declare Short term gain Rs.2518(15% on gain)? If is it okay, then Kindly confirm is it 8% or 6% of turnover.

i do stock market trading and show it as my business income while filing IT returns. do i have anything to do with GST. Do i need to register for GSTN etc. will gst be included in my contract note. kindly clarify

Really appreciate you for replying to the queries personally. Can you enlighten on the set off against following charges :-
Internet/phone bills if used for trading (portion proportionate to your usage on the bill)
Depreciation of computer/other electronics (used for trading)
Rental expense (if the place used for trading, if a room used – portion of your rent)
Salary paid to anyone helping you trade
Advisory fees, cost of books, newspapers, subscriptions and more…

Sir,
1.a company or a professional having shown 8% profit & paid tax as accordingly, do they need to get the accounts audited by CA as per 44AB & 44AD;
2. when these (above 8% NP kind) people or companies go to bank for financial borrowings, why banks insist for CA signature inspite of being tax paid genuinely for 8% Profit
i am not against accounts being audited but i need clarity about this 8% Np>>tax paid thing

1. Company doesn’t get benefit of 44AB and 44AD. For professional the slab is 50% of turnover.
2. Bank will ask a CA to certify. But this is different than getting an audit done for your ITR. They are two separate things.